INSTRUCTIONS: Help me answer the given question and choose the correct answer. 3 A small strip-mining coal company is trying to decide whether it should purchase or lease a new clamshell. If purchased, the "shell"will cost $177,500 and is expected to have a $50,000 salvage value after 6 years. Alternatively, the company can lease a clamshellfor only $17,000 per year, but the lease payment will have to be made at the beginning of each year. If the clamshell is purchased, itwill be leased to other strip-mining companies whenever possible, an activity that is expected to yield revenues of $10,000 per year.If the company's MARR is 14% per year, should the clamshell be purchased or leased on the basis of a future worth analysis?Assume the annual M&O cost is the same for both options.Calculate the future worth for the purchased alternative and leased alternative(A)(ВBFuture worth when purchased: $-172,252Future worth when leased: $-222,830The clamshell should be purchasedFuture worth when purchased: $-174,878Future worth when leased: $-171,136The clamshell should be leasedFuture worth when purchased: $-220,152Future worth when leased: $-230,454The clamshell should be purchasedFuture worth when purchased: $-254,252Future worth when leased: $-165,418The clamshell should be leased

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Answered: A small strip-mining coal company is…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 10P

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