A firm can lease a truck for 4 years at a cost of $30,000 annually. It can instead buy a truck at a cost of $80,000 (in year 0), with annual maintenance expenses of $10,000 (year 1 to year 4). The truck lasts four years. The discount rate is 10%. Is it better to lease instead of buying the truck?

(Hint: the calculation is similar to Q6 and the Machine A/B example in class. The only difference is that you dont need to calculate EAC for the lease option its $30,000 annually.)

Lease - Annual finance payment is $31,699

Lease - Annual finance payment is $35,237

Buy - PV of lease is $95,096

Buy - PV of lease is less than cost of financing truck