A land surveyor just starting in private practice needs a van to carry crew and

Question

A land surveyor just starting in private practice needs a van to carry crew and
equipment. He can lease a used van for $3,000 per year, paid at the
beginning of each year, in which case maintenance is provided. Alternatively,
he can buy a used van for $7,000 and pay for maintenance himself. He
expects to keep the van three years at which time he could sell it for $1,500.
What is the most he should pay for uniform annual maintenance to make it
worthwhile buying the van instead of leasing it, if his pre-tax MARR is 20%?
4
Answer in dollars, without dollar sign or other symbols

Explanation / Answer

Lease:

EAC = 3,000(F/P, 20%, 1) = 3,000(1.20) = 3,600

Buy:

EAC

= 7,000(A/P, 20%, 3) + M - 1,500(A/F, 20%, 3)

  M

= 3,600 - 2,910.85

       = 689.15

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.