Question
In: Economics
A warehouse is trying to determine whether they should purchase or lease a pallet wrapping station....
A warehouse is trying to determine whether they should purchase or lease a pallet wrapping station. If the warehouse buys a pallet wrapping station, it will cost $7,000 and will be depreciated as 7-year MACRS property. It would have negligible salvage value at the end of its useful life. Alternatively, the company could rent a pallet wrapping station for $700 per year with payments due at the end of each year. The operating costs and maintenance costs for the pallet wrapping station would be the same regardless of whether it is leased or purchased, so these costs do not need to be considered in the analysis. The company will need the pallet wrapper for 10 years. Assuming an after-tax MARR of 7% and a tax rate of 32%, compute the PW of each alternative and determine whether the warehouse should lease or purchase a pallet wrapper.
Solutions
Rahul Sunny answered 9 months agoRelated Solutions
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