A machine tool for casting parts has a list price of $3,000,000. It can be leased for $400,000 per year, payable at the beginning of each year. The cash price for purchasing the machine tool is $2,500,000, which can be sold for $50,000 after 10 years of use. 

(a) What is the interest rate for leasing? Clearly write the equation for finding the interest rate using the factors. (do NOT calculate yet!)

 (b) Is the interest rate more or less than 10%? (Why? show work)

c) Which is the better choice, buying or leasing the robot if MARR = 8%

Answer rating: 100% (QA)

To find the interest rate for leasing we can use the Net Present Value NPV formula Th... View the full answer