Dallas Corp

question 69

Multiple Choice

Dallas Corp. is trying to decide whether to lease or purchase a piece of equipment needed for the next five years. The equipment would cost $100,000 to purchase, and maintenance costs would be $10,000 per year. After five years, Dallas estimates it could sell the equipment for $30,000. If Dallas leased the equipment, it would pay a set annual fee that would include all maintenance costs. Dallas has determined after a net present value analysis that at its hurdle rate of 12% it would be better off by $11,000 if it leases the equipment. What would the approximate annual cost be if Dallas were to lease the equipment?

• A) $21,800
• B) $27,800
• C) $30,000
• D) $34,700

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