Foster Incorporated is trying to decide whether to lease or purchase a piece of equipment needed for the next 10 years. The equipment would cost $53,000 to purchase, and maintenance costs would be $5,200 per year. After 10 years, Foster estimates it could sell the equipment for $25,000. If Foster leases the equipment, it would pay $15,000 each year, which would include all maintenance costs. If Foster's cost of capital is 12%, Foster should: (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1) Note: Use the appropriate factors from the PV tables. Multiple Choice buy the equipment, as the net present value of the cost is about $53,000 less. lease the equipment, as the net present value of the cost is about $10,400 less. buy the equipment, as the net present value of the cost is about $10,400 less. О lease the equipment, as the net present value of the cost is about $6,700 less.
Foster Incorporated is trying to decide whether to lease or purchase a piece of equipment needed for the next 10 years. The equipment would cost $53,000 to purchase, and maintenance costs would be $5,200 per year. After 10 years, Foster estimates it could sell the equipment for $25,000. If Foster leases the equipment, it would pay $15,000 each year, which would include all maintenance costs. If Foster's cost of capital is 12%, Foster should: (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1) Note: Use the appropriate factors from the PV tables. Multiple Choice buy the equipment, as the net present value of the cost is about $53,000 less. lease the equipment, as the net present value of the cost is about $10,400 less. buy the equipment, as the net present value of the cost is about $10,400 less. О lease the equipment, as the net present value of the cost is about $6,700 less.
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section: Chapter Questions
Problem 4P
Related questions
Question
![Foster Incorporated is trying to decide whether to lease or purchase a piece of equipment needed for the next 10 years. The equipment would cost $53,000 to purchase, and maintenance costs would be $5,200 per
year. After 10 years, Foster estimates it could sell the equipment for $25,000. If Foster leases the equipment, it would pay $15,000 each year, which would include all maintenance costs. If Foster's cost of capital is 12%,
Foster should: (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1)
Note: Use the appropriate factors from the PV tables.
Multiple Choice
buy the equipment, as the net present value of the cost is about $53,000 less.
lease the equipment, as the net present value of the cost is about $10,400 less.
buy the equipment, as the net present value of the cost is about $10,400 less.
О
lease the equipment, as the net present value of the cost is about $6,700 less.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ffa24677f-502a-404a-8d86-ccfae21eb7ff%2F0c9e6659-26b5-4e87-9d2a-0d3b6f2ff6e9%2Fjscuioi_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Foster Incorporated is trying to decide whether to lease or purchase a piece of equipment needed for the next 10 years. The equipment would cost $53,000 to purchase, and maintenance costs would be $5,200 per
year. After 10 years, Foster estimates it could sell the equipment for $25,000. If Foster leases the equipment, it would pay $15,000 each year, which would include all maintenance costs. If Foster's cost of capital is 12%,
Foster should: (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1)
Note: Use the appropriate factors from the PV tables.
Multiple Choice
buy the equipment, as the net present value of the cost is about $53,000 less.
lease the equipment, as the net present value of the cost is about $10,400 less.
buy the equipment, as the net present value of the cost is about $10,400 less.
О
lease the equipment, as the net present value of the cost is about $6,700 less.
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