Apricot Computers is considering replacing its material handling system and either purchasing or leasing a new system. The old system has an annual operating and maintenance cost of $$30,000,$ a remaining life of $8$ years, and an estimated salvage value of $$4,300$ at that time.

A new system can be purchased for $$278,000$; it will be worth $$27,000$ in $8$ years; and it will have annual operating and maintenance costs of $$19,\frac{000}{?}$ year. If the new system is purchased, the old system can be traded in for $$21,000.$

Leasing a new system will cost $$25,\frac{000}{?}$ year, payable at the beginning of the year, plus operating costs of $$8,\frac{700}{?}$ year, payable at the end of the year. If the new system is leased, the old system will be sold for $$10,000.$

MARR is $18\%.$ Compare the annual worths of keeping the old system, buying a new system, and leasing a new system based upon a planning horizon of $8$ years.

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Part a

What is the EUAC of the best option using the cash flow approach?

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