Question
A mine is considering leasing a fleet of 13 haul trucks from vendor A for a 9 year Maintenance and Repair Contract (MARC). The lease
A mine is considering leasing a fleet of 13 haul trucks from vendor "A" for a 9 year Maintenance and Repair Contract (MARC). The lease cost on the first 5 years is $25 million/year and after that will significantly decrease to $18 million/year until the end of mine life. At the end of 5th year, there will be a major overhaul at the cost of $650k / truck. In addition to that, the year after all the overhauls have been completed, the vendor will charge additional maintenance fee, which will gradually increase by $50k /truck/ year. This additional cost will be charged to the company. The company currently has only $130M to lease those fleets. Based on the current budget, is it feasible to lease the trucks? The cost of capital is 10% (5 pts.).
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