A contractor must choose between buying or renting a crane for the duration of a 5 year construction project. The contractor uses an MARR of 8%. The crane costs $520,000 and can be sold for $380,000 after 5 years. The cost to operate and maintain the crane is $210,000 per year. Renting the crane costs $310,000 per year including all operating and maintenance costs. Determine the incremental benefit-cost ratio that the contractor should use to decide between buying and renting. Express your answer to two decimal places.

A contractor must choose between buying or renting a crane for the duration of a 5 year construction project. The contractor uses an MARR of 8%. The crane costs $520,000 and can be sold for $380,000 after 5 years. The cost to operate and maintain the crane is $210,000 per year. Renting the crane costs $310,000 per year including all operating and maintenance costs. Determine the incremental benefit-cost ratio that the contractor should use to decide between buying and renting. Express your answer to two decimal places.

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter17: Long-term Investment Analysis

Section: Chapter Questions

Problem 10E

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