Last year your company purchased a used compressor for a gas gathering line

system for $$55,000.$ The field manager just called and informed you the

machine broke down and needs to be replaced ASAP. You have found a new

compressor with a purchase price of $$97,830$ that you can have delivered to

the job site that would meet the necessary service requirements. Assume the

new asset would have a zero$-$salvage value at the end of year $6.$ The other

option is to rent a compressor and eliminate the upfront cost. The rental price

will be $$2,000$ per month for $12$ months paid at the beginning of each month.

The rental agent informed you the cost is anticipated to escalate $5\%$ at the end

of each year. Build a $6-$year model accounting for the cost escalation after $12$

monthly payments. Based on a Present Worth Cost analysis should you lease

or purchase? Confirm your selection by calculating an incremental NPV and

ROR analysis. Your company uses a $12\mathrm{.}68\%$ effective annual interest rate.

If there was a fee to buy the compressor, how much could it be to make you

economically indifferent?