A tax company owns several taxis that were purchased for $25000 each 4 years ago

Question

A tax company owns several taxis that were purchased for $25000 each 4 years ago. The cabs R current market value is $15,000 each and if they are kept for another 5 years they can be sold for $5000 per cab. The annual maintenance cost per cab is $1800 per year. The company has be approached about a leasing plan that would replace the cabs. The leasing plan calls for payments of $4500 per year. The annual maintenance cost for each leased cab is $650 per year. Should the cabs be replaced if the interest rate is 10%?

Explanation / Answer

False, 10% return is higher than the the return from cab. Since From cab at the end of 9 years he will get 7450. andfrom 10% return he will get 22500

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