0 https/ t.htm , Add, or Drop Classes aper Ce Hoework Problems 2 lddyToy Corportion needs to ecurethe use of machine to be used in its menufacturng process. The machine needed is manufectured by Lolle Corp. The machine can be used for 11 years and then sold for $%.000 at the end of its spetul ife. Lollie has presented Kiddy with the following options: Vof StPV of St FVAofS PVA oS1 EVAD of St and VAD 5 (Use appropriate actors) from the tables provided Buy machine. The machine could be purchnsed for $166.000 in cesh. All maintenance and insurance cosss, which approximate $1.000 per yeer, would be paid by Kiddy 2 Lease machine The machine could be lessed for a 11-year period for an annuai lease payment of $31,000 with the frat payment due mmediately Ai mantenence end nsurance costs wa be paid for by the Loli. Cop. and the mechine will revert back to Lole ot the end of the 1-year period a Required Assuming t 1% interest rate properly reflects the sme value of monay in this siuation and that all maintenance and insurance l which option Kiddy should choose. ONegaive amounts should be Indicated by a ms sign. Round your final answers to nearest whole dolar amount
Option-Buy Year Cash flows PVF @11% Present Values 0 -166000 1 -166000 1 -11000 0.900901 -9909.91 2 -11000 0.811622 -8927.85 3 -11000 0.731191 -8043.11 4 -11000 0.658731 -7246.04 5 -11000 0.593451 -6527.96 6 -11000 0.534641 -5881.05 7 -11000 0.481658 -5298.24 8 -11000 0.433926 -4773.19 9 -11000 0.390925 -4300.17 10 -11000 0.352184 -3874.03 11 4000 0.317283 1269.133 Present Worth -229512 Option-Lease Year Cash flows PVF @11% Present Values 0 -31000 1 -31000 1 -31000 0.900901 -27927.9 2 -31000 0.811622 -25160.3 3 -31000 0.731191 -22666.9 4 -31000 0.658731 -20420.7 5 -31000 0.593451 -18397 6 -31000 0.534641 -16573.9 7 -31000 0.481658 -14931.4 8 -31000 0.433926 -13451.7 9 -31000 0.390925 -12118.7 10 -31000 0.352184 -10917.7 11 0 0.317283 0 Present worth -213566 Hence, Machine shall be taken on Lease
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