A shoe factory can buy a sewing machine with a down payment of $ 455,000, which is equivalent to 30% of the cash value and the rest financed in 30 months with equal monthly installments and an interest of 3.2% per month on the balance; the monthly maintenance cost of the machines is $ 18,000, it requires a repair after four years for the value of $ 160,000, it has a useful life of six years and a market value of $ 680,000; in addition, a monthly income of $ 80,000 is obtained. There is also the possibility of taking a machine on lease for the same period of six years and in which leases must be paid as follows: $ 32,000 per month the first year and then increase by $ 4,000 each year; the monthly income will be equal to that of the first machine. 

Determine the best alternative for a discount rate of 30% nominal monthly.

Answer rating: 100% (QA)

The best alternative would be to buy the sewing machine outright ... View the full answer