Question
Dallas Corp. is trying to decide whether to lease or purchase a piece of equipment needed for the next five years. The equipment would cost
Dallas Corp. is trying to decide whether to lease or purchase a piece of equipment needed for the next five years. The equipment would cost $140,000 to purchase, and maintenance costs would be $50,000 per year. After five years, Dallas estimates it could sell the equipment for $70,000. If Dallas leased the equipment, it would pay a set annual fee that would include all maintenance costs. Dallas has determined after a net present value analysis that at its hurdle rate of 12% it would be better off by $54,000 if it leases the equipment. What would the approximate annual cost be if Dallas were to lease the equipment? (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Use appropriate factor from the PV tables. Do not round intermediate calculations. Round your final answer to the nearest hundred.)
Multiple Choice
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$48,600
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$38,900
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$30,500
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$62,800
You will need at least $5,000 in four years and your friend says she can either loan you $5,000 all at once four years from now or she can deposit $1,250 in your savings account at the end of each year for the next four years. Your savings account earns 8% interest, compounded annually. Which option would be worth more to you four years from now, and how much more? (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Use appropriate factor from the PV tables. Round your final answer to the nearest dollar amount.)
Multiple Choice
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The annual deposits will be worth $633 more than the $5,000 in four years.
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The $5,000 in four years will be worth $633 more than the annual deposits.
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The $5,000 in four years will be worth $441 more than the annual deposits.
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The annual deposits will be worth $441 more than the $5,000 in four years.
You have $11,900 that you can invest in a savings account that earns 12.0% interest, compounded annually. If you want to withdraw at least $19,900 at some point in the future, how long will you need to keep the money invested? (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Use appropriate factor from the PV tables. Round your final answer to nearest dollar amount.)
Multiple Choice
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7 years
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5 years
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8 years
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6 years
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