Ple

Dallas Corporation is trying to decide whether to lease or purchase a piece of equipment needed for the next 5 years. The equipment would cost $120,000 to purchase, and maintenance costs would be $30,000 per year. After 5 years, Dallas estimates it could sell the equipment for $50,000. 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 cost of capital of 12% it would be better off by $20,000 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)

Note: (Use the appropriate factors from the PV tables.)

Multiple Choice

$26,200

$33,400

$49,900

$41,600ase help.