A diesel generator for electrical power can be pur-chased
Chapter , Problem 7-82(choose chapter or problem)
A diesel generator for electrical power can be pur-chased by a remote community for $480,000 andused for 10 years, when its salvage value is $50,000.Alternatively, it can be leased for $70,000 a year.(Remember that lease payments occur at the start ofthe year.) The communitys interest rate is 8%.(a)What is the interest rate for buying versusleasing? Which is the better choice?(b)The community will spend $80,000 less eachyear for fuel and maintenance, than it currentlyspendsonbuying power.Shouldit obtain the gen-erator? What is the rate of return for the generatorusing the best financing plan?
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