Question
How do you use a financial calculator for this question? 7-12. Present Value of an Ordinary Annuity, Purchase or Lease Analysis. Fata Food Emporium decides
How do you use a financial calculator for this question?
7-12. Present Value of an Ordinary Annuity, Purchase or Lease Analysis. Fata Food Emporium decides to obtain a new refrigerator to store its meat and produce. The refrigerator has a 15 -year useful life and can be sold for$15,000at the end of its useful life. Fata has two options: a. Purchase the Refrigerator: Purchase the refrigerator in cash for$100,000. Fata would have to pay all maintenance/insurance costs, which would be$3,000per year. b. Lease the Refrigerator: Lease the refrigerator for a 15-year period. Annual lease payments amount to$15,000with the first payment beginning at the end of the year. The seller will pay maintenance and insurance costs, and Fata will return the refrigerator to the seller after 15 years. Assuming that maintenance and insurance costs are paid at year-end and an interest rate of 10\% compounded annually, which option should Fata choose?
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