Emma Runs a Small Factory That Needs a Vacuum Oven

question 71

Multiple Choice

Emma runs a small factory that needs a vacuum oven for brazing small fittings. She can purchase the model she needs for $180 000 up front, or she can lease it for five years for $3 500 per month. She can borrow at 5% APR, compounded monthly. Assuming that the oven will be used for five years, should she purchase the oven or should she lease it?

• A)Buy, since the present value (PV)of the lease is $5 468 more than the cost of the oven.
• B)Lease, since the present value (PV)of the lease is $8 642 less than the cost of the oven.
• C)Lease, since the present value (PV)of the lease is $2 212 less than the cost of the oven.
• D)Lease, since the present value (PV)of the lease is $12 224 less than the cost of the oven.

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