Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

A shoe factory can buy a sewing machine with a down payment of $ 455,000, which is equivalent to 30% of the cash value and

A shoe factory can buy a sewing machine with a down payment of $ 455,000, which is equivalent to 30% of the cash value and the rest financed in 30 months with equal monthly installments and an interest of 3.2% per month on the balance; the monthly maintenance cost of the machines is $ 18,000, it requires a repair after four years for the value of $ 160,000, it has a useful life of six years and a market value of $ 680,000; in addition, a monthly income of $ 80,000 is obtained. There is also the possibility of taking a machine on lease for the same period of six years and in which leases must be paid as follows: $ 32,000 per month the first year and then increase by $ 4,000 each year; the monthly income will be equal to that of the first machine. 

Determine the best alternative for a discount rate of 30% nominal monthly.

Step by Step Solution

3.42 Rating (165 Votes )

There are 3 Steps involved in it

Step: 1

The best alternative would be to buy the sewing machine outright ... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Business Law Text and Cases

Authors: Kenneth W. Clarkson, Roger LeRoy Miller, Gaylord A. Jentz, F

11th Edition

324655223, 978-0324655223

More Books

Students also viewed these Mathematics questions