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In order to better serve its community, the KSU police department wants to acquire a new s

In order to better serve its community, the KSU police department wants to acquire a new s

In order to better serve its community, the KSU police department wants to acquire a new surveillance system. The new system can be purchased or it can be leased from the building in which the police department has recently moved. If purchased, the system will cost $87,500 and will have a useful life of 5 years with no market value at that time. The annual operating cost is expected to be $52,000 per year. To lease the system, the police department must pay a nonrefundable deposit of $21,500, an end-of-year leasing fee of $20, 000, and an additional annual inspection and maintenance cost of $1000. Additionally, the operating costs incurred by the police department will be reduced to $3400 per year. The department's after tax MARR is 10% per year and the effective income tax rate is 36% per year. Determine whether the police department should purchase or lease the surveillance system. Assume straight-line depreciation with zero salvage value and a study period of 5 years. KSU police needs your help with this analysis.

Abhinav 03-Dec-2019

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