You consider two alternative approaches for a new machine shop which is needed by your...
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You consider two alternative approaches for a new machine shop which is needed by your company. A new shop initially costs $80,000 to build. In addition, you need to buy machines and tools at a price of $30,000 and the purchased equipment will have a 5-year life and $7,000 salvage value (at the end of year 5). As an alternative, the company can lease the shop and same equipment for a fixed price of $21,500 per year for 5 years. The estimated operating cost for the shop in both cases is $9,000 at the end of year 1, and increasing at a rate of 6% annually. If the anticipated interest rate is 10%, determine which alternative is more economical. Answer is: 143,693 for option A, $127692 for option B. Just dont know how to get there
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