Be-low Mining, Inc., is trying to decide whether it should purchase or lease new earthmoving equipment. If purchased, the equipment will cost $175,000 and will be used 6 years, at which time it can be sold for $72,000. At Year 3, an overhaul costing $20,000 must be performed. The equipment can be leased for $30,000 per year. Be-low will not be responsible for the midlife overhaul if the equipment is leased. If the equipment is purchased, it will be leased to other mining companies when possible; this is expected to yield revenues of $15,000 per year. The annual operating cost regardless of the decision will be approximately equal. What would you recommend if the MARR is 6%?
Be-low Mining, Inc., is trying to decide whether it should purchase or lease new earthmoving equipment. If purchased, the equipment will cost $175,000 and will be used 6 years, at which time it can be sold for $72,000. At Year 3, an overhaul costing $20,000 must be performed. The equipment can be leased for $30,000 per year. Be-low will not be responsible for the midlife overhaul if the equipment is leased. If the equipment is purchased, it will be leased to other mining companies when possible; this is expected to yield revenues of $15,000 per year. The annual operating cost regardless of the decision will be approximately equal. What would you recommend if the MARR is 6%?
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