Evaluate the two alternatives

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Problem - Acquisition of Equipment - Taylor Company's manager has consulted you, the controller, as to which of the following plans you would recommend in acquiring the use of a piece of heavy equipment:

1. Purchase the equipment and pay immediately a cash price of $36,800. The service life of the heavy equipment is estimated to be 5 years, with a resale value at the end of that time of $5,500.

2. Lease the equipment at the rate of $9,100 per year for 5 years, payable at the beginning of each year.

Required - Assuming that the time value of money is 12%, evaluate the two alternatives and indicate which plan you would recommend to the manager, stating the value of savings to the company.

Reference no: EM132882989

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