Question: A Manufacturing Firm Can Purchase A Workstation For $10,000. It Is Estimated That The Useful Life Of The Work- Station Is 3 Years, And Its Market Value In 3 Years Should Be $1,000. Operating Expenses Are Estimated To Be $20 Per Eight-hour Workday, And Maintenance Will Be Performed For $4,000 Per Year. The Effective Income Tax Rate Is 40% And Depreciation …

Question: A Manufacturing Firm Can Purchase A Workstation For $10,000. It Is Estimated That The Useful Life Of The Work- Station Is 3 Years, And Its Market Value In 3 Years Should Be $1,000. Operating Expenses Are Estimated To Be $20 Per Eight-hour Workday, And Maintenance Will Be Performed For $4,000 Per Year. The Effective Income Tax Rate Is 40% And Depreciation …

A manufacturing firm can purchase a workstation for $10,000. Itis estimated that the useful life of the work- station is 3 years,and its market value in 3 years should be $1,000. Operatingexpenses are estimated to be $20 per eight-hour workday, andmaintenance will be performed for $4,000 per year. The effectiveincome tax rate is 40% and depreciation deduction is calculated bythe Straight-Line method. As an alternative, sufficient machiningtime can be leased from a service company at an annual cost of$10,000. The workstation is planned to be utilized for 100 workdaysin a year. Determine if leasing is a better alternative than thepurchase by using an annual worth analysis. Assume that operatingexpenses are associated with ownership. The after-tax MARR is 10%per year.