A developer is deciding whether to purchase some heavy-duty landscaping equipment. The alternative is to rent the equipment. One set of equipment will cost $40,000 with no salvage value, depreciated using straight-line over 5 years. Operating and maintenance costs are $320 per day. Similar equipment can be rented for $600 per day (weekends included). The analysis needs to be on an after-tax basis. The combined marginal income tax rate is 26%, and the after-tax MARR is 10%. How many days per year must the equipment be used in order to justify its purchase?
A developer is deciding whether to purchase some heavy-duty landscaping equipment. The alternative is to rent the equipment. One set of equipment will cost $40,000 with no salvage value, depreciated using straight-line over 5 years. Operating and maintenance costs are $320 per day. Similar equipment can be rented for $600 per day (weekends included). The analysis needs to be on an after-tax basis. The combined marginal income tax rate is 26%, and the after-tax MARR is 10%. How many days per year must the equipment be used in order to justify its purchase?
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 4P
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A developer is deciding whether to purchase some heavy-duty landscaping equipment. The alternative is to rent the equipment. One set of equipment will cost $40,000 with no salvage value, depreciated using straight-line over 5 years. Operating and maintenance costs are $320 per day. Similar equipment can be rented for $600 per day (weekends included). The analysis needs to be on an after-tax basis. The combined marginal income tax rate is 26%, and the after-tax MARR is 10%. How many days per year must the equipment be used in order to justify its purchase?
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