Question
You need a particular piece of equipment for your production process. An equipment-leasing company has offered to lease the equipment to you for $ 9
You need a particular piece of equipment for your production process. An equipment-leasing company has offered to lease the equipment to you for $ 9 comma 500$9,500 per year if you sign a guaranteed 55-year lease (the lease is paid at the end of each year). The company would also maintain the equipment for you as part of the lease. Alternatively, you could buy and maintain the equipment yourself. The cash flows from doing so are listed below (the equipment has an economic life of 55 years). If your discount rate is 7.1 %7.1%, what should you do? Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 negative $ 39 comma 500$39,500 negative $ 2 comma 000$2,000 negative $ 2 comma 000$2,000 negative $ 2 comma 000$2,000 negative $ 2 comma 000$2,000 negative $ 2 comma 000$2,000 The net present value of the leasing alternative is $ nothing. (Round to the nearest dollar.)
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