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A Construction Company is reviewing four methods of acquiring golf carts for use by the Project Managers. The alternatives are: 1. Purchase the golf cart
A Construction Company is reviewing four methods of acquiring golf carts for use by the Project Managers. The alternatives are: 1. Purchase the golf cart for $14,000 each. The cart is expected to have a useful life of 4 years and an estimated residual trade value of $1,250 each. 2. Lease the cart for 4 years for $4,400 per year/per cart paid in advance at the beginning of each year. (The Construction Company does not own the cart in Alternative 2) 3. Purchase the cart with $1,300 down payment and $5,200 yearly payment at the end of each year for 3 years per car. Assume the cart has an estimated residual trade value of $1,800 each. 4. Purchase the cart with one payment of $14,000. Assume no residual value for this option. If the contractor's MARR is 20%, which alternative should he choose? (Note: All alternatives involve equal lives.)
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