As one aspect of its business, New Lawn Company currently rents a ditchdigging machine for an average

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As one aspect of its business, New Lawn Company currently rents a ditchdigging machine for an average of $\$ 48$ per job. A used machine is available for $\$ 995$ but would cost $\$ 498$ to repair. The machine, if purchased, would cost $\$ 800$ a year to maintain and in two years would need a new chain costing $\$ 394$. The used digger has a useful life of four years with no salvage value.

If the company averages 30 jobs a year and has a cost of capital of 10 percent, which alternative is more profitable?

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Survey Of Accounting

ISBN: 9780538846172

1st Edition

Authors: James D. Stice, W. Steve Albrecht, Earl Kay Stice, K. Fred Skousen

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