A project engineering is assigned to start up a new project in a city where a 5-year contract has been finalized the project. Two lease options are available each with a first cost, annual cost, overhaul cost, and deposit -return estimates shown in below. Determine which lease option should be selected on the basis of a present worth comparison, if the MARR is 20% per year.

 

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First cost,S Annual lease cost per year,S Overhaul cost in year 3 Overhaul cost in year 4 Deposit return,$ Lease term, years Location A - 400,000 - 90,000 -70,000 60,000 5 Location B - 320,000 - 110,000' -120,000 100,000 10 First cost,S Annual lease cost per year,S Overhaul cost in year 3 Overhaul cost in year 4 Deposit return,$ Lease term, years Location A - 400,000 - 90,000 -70,000 60,000 5 Location B - 320,000 - 110,000' -120,000 100,000 10

Answer rating: 100% (QA)

Solution Given two investment options one at location A and another one at location B ... View the full answer