Hello, I need help with the following problem: \"Packaging equipment for Xi Xlin

Question

Hello, I need help with the following problem:

"Packaging equipment for Xi Xling Wrap costs $60,000 and is expected to result in end of the year net savings of $23,000 per year for 3 years. The equipment will have a market value of $10,000 after 3 years. The equipment can be leased for $21,000 per year, payable at the beginning of each year. Xi Clilng's MARR is 10 percent/year.

Based on an annual worth analysis, ---determine if the packaging equipment should be pruchased or leased.

(please show your detalied analysis answer in excel format with step by step formulas) Thank you!

Explanation / Answer

Based on Annual worth principle , the machine should be purchased as the annual worth is higher.

Particulars/Year 0 1 2 3 Initial Investment -60000 Savings 23000 23000 23000 Market Value at the end of 3rd year 10000 Funds flow 23000 23000 33000 PV@10% 20909.09 19008.26 24793.39 Annual Worth (Purchase) 21570.25 Lease Fund Flow 21000 21000 21000 NPV 19090.91 17355.37 15777.61 Annual Worth(Lease) 17407.96

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