Question

A firm is considering whether to buy specialized3 equipment that would cost $200,000 and have annual costs of $15,000. After 5 years of operation, the equipment would have no salvage value. The same equipment can be leased for$50,000 per year (annual costs included in the lease), payable at the beginning of each year. Ifthe firm uses an interest rate of 5% per year, the annual cost advantage of leasing over purchasing-is nearest what value? (a) $2494(b) $8694(c) $11,200(d) $12,758

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