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A contractor is considering the following three alternatives: a. Purchase a new tractor for $15000. The system is expected to last 6 yr with a
A contractor is considering the following three alternatives:
a. Purchase a new tractor for $15000. The system is expected to last 6 yr with a salvage value of $1,000.
b. Lease a new tractor for $3,000 per year, payable in advance (at the begining if each year). The system should last 6 yr.
c. Purchase a used tractor for $8,200. It is expected to last 3 yr with no salvage value.
If interest rate of 12% is used, which alternative should be selected?
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