Use the Information for the Question(s)below

question 50

Essay

Use the information for the question(s)below.
Your firm needs to invest in a new delivery truck.The life expectancy of the delivery truck is five years.You can purchase a new delivery truck for an upfront cost of $200,000,or you can lease a truck from the manufacturer for five years for a monthly lease payment of $4000 (paid at the end of each month).Your firm can borrow at 6% APR with quarterly compounding.
-Should you purchase the delivery truck or lease it? Why?

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Definitions:

Price Floor

A government-imposed minimum price that can be charged for a good or service, designed to protect producers by ensuring that market prices do not fall below a certain level.

Surplus

The situation where the quantity of a good or service supplied exceeds the quantity demanded at the current price.

Shortage

A situation where the demand for a product exceeds its supply at a specific price.

Quota Rent

The economic rent a producer earns from the difference between the market price of a good and its supply price due to a quota limit.