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qid 860 · business

Question: A company has a permit to mine for gold in a region of New Mexico for 3 years. Management is trying to decide how to finance the machinery. One option is to rent it for $130 per month over the three years. The deal includes the fuel needed to operate the equipment. The other option is to buy the equipment now and. it after three years. The machinery costs $11,500. There is a down payment of $2,500, so that the balance due will be $11,500 - $2,500 = $9,000. This balance will be covered by a 5(1/2)% loan to be paid in equal annual installments over 15 years. The annual fuel costs for the equipment would be $375. If the minimum attractive rate of return is 5%, at what resale value (end of third year) will both options be equally economical? Make all calculations to the nearest dollar.

  1. $8,400
  2. $2,650
  3. $6,825
  4. $5,760
  5. $4,248
  6. $1,987
  7. $7,950
  8. $10,500
  9. $9,937
  10. $3,500

Our answer: I. $9,937 Source quote machine-checked (exact quote)

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How it was answered

Stored formula / worked method, replayed by code

Equipment financing lease versus buy equivalent worth breakeven salvage problem

card: formula · card sha256 45931e237322ef4f…

Current source

Engineering Economy course notes, Unit 6 Lesson 2, Present Worth Analysis

https://engmohannadb.github.io/etccourse21/inner-page/U6-L2.html

“The present worth method is quite popular in industry because all future costs and revenues are transformed to equivalent monetary units NOW; that is, all future cash flows are converted (discounted) to present amounts (e.g., dollars) at a specific rate of return, which is the MARR.”

Source quote machine-checked (exact quote)

retrieved 2026-09-18T00:09:54.633Z

page text sha256 5ff4eaff0915a878… · content sha256 b6a67797c4723370…

addendum formula_qid860.formula_ADDENDUM_source_rs20260918T000954Z · sha256 ecb4a3ac43bef78f… · replaces the version below, addendum sha256 83a6826815001fc2…

Earlier version (superseded)

No public source has been found for this card yet (5 places checked internally).

addendum formula_qid860.formula_ADDENDUM_source · sha256 83a6826815001fc2…

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