Homework Answers
Annual cost saving for the Purchase option ($) = 50,000 x (5.8 - 4.3) = 50,000 x 1.5 = 75,000
Maximum price ($) = PV of annual cost saving + PV of salvage value
= 75,000 x P/A(10%, 5) + 200,000 x P/F(10%, 5)
= 75,000 x 3.7908 + 200,000 x 0.6209
= 284,310 + 124,180
= 408,490
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