15

Daniels market is expanding their fresh produce business and are in need of cold storage equipment. The firm can lease a cold storage equipment for 4 years at a cost of $32,000 annually. It can instead buy a cold storage equipment at a cost of $82,000, with annual maintenance expenses of $12,000. The cold storage equipment will be sold at the end of 4 years for $22,000.

a. What is the equivalent annual cost of buying and maintaining the cold storage equipment if the discount rate is 10%? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

b. Which is the better option?

• Buy

• Lease