Question
Emerson Corp. is trying to decide whether to lease or purchase a piece of equipment needed for the next five years. The equipment would cost
Emerson Corp. is trying to decide whether to lease or purchase a piece of equipment needed for the next five years. The equipment would cost $502,000 to purchase, and maintenance costs would be $20,100 per year. After five years, Emerson estimates it could sell the equipment for $100,500. If Emerson leases the equipment, it would pay $150,700 each year, which would include all maintenance costs. Emersons hurdle rate is 13%. (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.)
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