What are the net present costs for tractors

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Question: A community farm needs to purchase a new tractor for the upcoming year. The manager is trying to make a decision between three different tractor options. Tractor A is a 6-year lease with monthly payments of $9,000 due at the beginning of each month. This amount includes $100 a month for maintenance. Tractor B is the purchase of a new tractor for $575,000. The tractor's estimated useful lifetime is 6 years and it would require yearly maintenance payments of $1,000 throughout its lifetime. The maintenance payments are due at the beginning of each year. Tractor C also has an estimated useful lifetime of 6 years. This tractor would require an initial down payment of $200,000 and then monthly payments of $5,500 due at the end of each month. These payments include a small monthly maintenance fee. The community farm uses a discount rate of 3.5%.

What are the net present costs for Tractors A, B, and C?

Reference no: EM131956703

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