Question

A contractor is considering whether to buy or lease a new machine for her layout site...

A contractor is considering whether to buy or lease a new machine for her layout site work. Buying a new machine will cost $12,000 with a salvage value of $1200 after the machine's useful life of 8 years. On the other hand, leasing requires an annual lease payment of $3000. Assuming that the MARR is 15% and on the basis of an internal rate of return analysis, which alternative should the contractor be advised to accept?

Part A: – Do the lease-buy analysis before tax.

Part B – Do the analysis after tax. Use a tax rate of 22.98%,
and MACRS 7-year depreciation schedule.

Use Excel

Business   Economics   
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