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A manufacturing firm can purchase a workstation for $10.000. It is estimated that the useful life of the work-station is 3 years, and its market value in 3 years should be $1,000. Operating expenses

A manufacturing firm can purchase a workstation for $10.000. It is estimated that the useful life of the work-station is 3 years, and its market value in 3 years should be $1,000. Operating expenses are estimated to be $20 per eight-hour workday, and maintenance will be performed for $4,000 per year. The effective income tax rate is 40% and depreciation deduction is calculated by the Straight-Line method. As an alternative, sufficient machining time can be leased from a service company at an annual cost of $10,000. The workstation is planned to be utilized for 100 workdays in a year. Determine if leasing is a better alternative than the purchase by using an annual worth analysis. Assume that operating expenses are associated with ownership. The after-tax MARR is 10% per year. 

Apr 12 2021 View more View Less

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