Cases in Engi Economy - 6

Cases in Engi Economy - 6 - Case 6 Lease a Lot Round Table...

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Case 6 Lease a Lot Round Table Rental Yards provides construction equipment, trailers, crutcltes, etc., on short- term rentals. Historically, Ar-t, the owner, has purchascd the iterns that he rents out, but his business has been expanding so rapidly that he is considering both straigirt leases and lease- purchase arrangements. He has decided to use the procurenlent of a new bulldozer with a list price of $290,000 as a test case. If he purchases the bulldozer outright, then he must also decide whether he should plan on overhauling it or selling it after 3 years. This overhaul will cost about $ 150,000, but it should double the useful life of the bulldozer. However, the bulldozer's value on the used marketwould drop from $180,000 afterYear 3 to $135,000 afterYear 6. Its annual operation and maintenance costs will start at S25,000 and increase by $7500 each year. This increase is due to increased use more than to increased age, so it is not affected by the overhaul.
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Cases in Engi Economy - 6 - Case 6 Lease a Lot Round Table...

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