Answered step by step
Verified Expert Solution
Question
1 Approved Answer
A manufacturing firm can purchase a computer aided manufacturing (CAM) workstation for $40,000. It is estimated that the useful life of the workstation is six
A manufacturing firm can purchase a computer aided manufacturing (CAM) workstation for $40,000. It is estimated that the useful life of the workstation is six years, and its market value in six years should be $4,000. Operating expenses are estimated to be $80 per eight-hour workday, and maintenance will be performed for $16,000 per year. The effective income tax rate is 40% and depreciation deduction is calculated by the Straight Line method. As an alternative, sufficient computer time can be leased from a service company at an annual cost of $40,000. The workstation is planned to be utilized for 200 workdays in a year. Determine if leasing is a better alternative than the purchase by using an annual worth analysis. Assume that expenses (operational and maintenance) and depreciations are associated with ownership. The after-tax MARR is 15% per year
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started