Badonsky manufacturing needs to obtain a gear cutting machine, which can be purchased for $75,000. Badonsky estimates
Question:
Badonsky manufacturing needs to obtain a gear cutting machine, which can be purchased for $75,000. Badonsky estimates that repair, maintenance, insurance, and property tax expense will be $20,000 for the machine's five year life. At the end of the machine's life, it will have no salvage value.
As an alternative, Badonsky can lease the machine for five years for $18,000 per year. If the machine is leased, Badonsky is required to pay only for routine maintenance on the machine, which is estimated to be $8,000 over the machines life. All other costs will be paid by the lessor. Prepare a differential analysis to determine whether Badonsky should purchase or lease the machine.
Engineering Economy
ISBN: 978-0132554909
15th edition
Authors: William G. Sullivan, Elin M. Wicks, C. Patrick Koelling