of $35,000. It has five more years of straight-line depreciation available (if kept) of $7,000 per year, at which time its BV would be zero. The estimated market value of the equipment five years from now (in year 0 dollars) is $17,200. The market value escalation rate on this type of equipment has been averaging 3.1% per year. The total annual operating and maintenance (0 & M) expense and other related expenses are averaging $27,600 per year.New automated replacement equipment would be leased. Estimated O & M and related company expenses for the new equipment are $13,200 per year. The annual leasing costs would be $23,900. The MARR (after-tax including inflation component) is 10%, the effective tax rate is 25%, and the study period is five years. Based on an after-tax, A$ analysis, should the new equipment be leased? Use the IRR method.
Fig: 1