Your answer is partially correct. An independent contractor for a transportation company needs to determine whether she should upgrade the vehicle she currently owns or trade her vehicle in to lease a new vehicle. If she keeps her vehicle, she will need to invest in immediate upgrades that cost $5,200 and it will cost $1,300 per year to operate at the end of year that follows. She will keep the vehicle for 5 years; at the end of this period, the upgraded vehicle will have a salvage value of $3,800. Alternatively, she could trade in her vehicle to lease a new vehicle. She estimates that her current vehicle has a trade-in value of $9,800 and that there will be $4,100 due at lease signing. She further estimates that it willl cost $2,900 per year to lease and operate the vehicle. The independent contractor's MARR is 11%. Compute the EUAC of both the upgrade and lease alternatives using the insider perspective. Click here to access the TVM Factor Table Calculator. 1943.56 EUAC(keep): 1981.61 EUAC(lease): Carry all interim calculations to 5 decimal places and then round your final answers to a whole number. The tolerance is +5. Which alternative would you recommend to the independent contractor? Trade in her vehicle and lease a new one %24 %24

Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
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Your answer is partially correct.
An independent contractor for a transportation company needs to determine whether she should upgrade the vehicle she currently
owns or trade her vehicle in to lease a new vehicle. If she keeps her vehicle, she will need to invest in immediate upgrades that cost
$5,200 and it will cost $1,300 per year to operate at the end of year that follows. She will keep the vehicle for 5 years; at the end of this
period, the upgraded vehicle will have a salvage value of $3,800. Alternatively, she could trade in her vehicle to lease a new vehicle. She
estimates that her current vehicle has a trade-in value of $9,800 and that there will be $4,100 due at lease signing. She further
estimates that it will cost $2,900 per year to lease and operate the vehicle. The independent contractor's MARR is 11%. Compute the
EUAC of both the upgrade and lease alternatives using the insider perspective.
Click here to access the TVM Factor Table Calculator.
1943.56
EUAC(keep):
$
EUAC(lease):
1981.61
Carry all interim calculations to 5 decimal places and then round your final answers to a whole number. The tolerance is +5.
Which alternative would you recommend to the independent contractor?
Trade in her vehicle and lease a new one
%24
Transcribed Image Text:Your answer is partially correct. An independent contractor for a transportation company needs to determine whether she should upgrade the vehicle she currently owns or trade her vehicle in to lease a new vehicle. If she keeps her vehicle, she will need to invest in immediate upgrades that cost $5,200 and it will cost $1,300 per year to operate at the end of year that follows. She will keep the vehicle for 5 years; at the end of this period, the upgraded vehicle will have a salvage value of $3,800. Alternatively, she could trade in her vehicle to lease a new vehicle. She estimates that her current vehicle has a trade-in value of $9,800 and that there will be $4,100 due at lease signing. She further estimates that it will cost $2,900 per year to lease and operate the vehicle. The independent contractor's MARR is 11%. Compute the EUAC of both the upgrade and lease alternatives using the insider perspective. Click here to access the TVM Factor Table Calculator. 1943.56 EUAC(keep): $ EUAC(lease): 1981.61 Carry all interim calculations to 5 decimal places and then round your final answers to a whole number. The tolerance is +5. Which alternative would you recommend to the independent contractor? Trade in her vehicle and lease a new one %24
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