MANAGEMENT CONSULTING FIRM HAS TWO OPTIONS: BUY VAN FOR $30,000, MAINTENANCE COST OF $1,000 FOR FIRST YEAR
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Question:
- MANAGEMENT CONSULTING FIRM HAS TWO OPTIONS:
- BUY VAN FOR $30,000, MAINTENANCE COST OF $1,000 FOR FIRST YEAR RISING BY $400 PER YEAR THEREAFTER. KEEP THE VAN FOR FIVE YEARS WITH A SALVAGE VALUE OF $6,000. CCA RATE FOR VAN
- IS 30%.
- LEASE VAN FOR $10,500 PER YEAR FOR FIVE YEARS WITH MAINTENANCE INCLUDED. AFTER TAX CAPITAL COST IS 12% AND TAX RATE IS 40%.
- SHOULD THE COMPANY BUY OR LEASE BASED ON ANNUAL WORTH ANALYSIS.
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