Why should the cabs replaced if interest rate is ten percent


Problem

Green Cab Taxi Company owns several taxis that were purchased for $25,000 each 4 years ago. The cabs' current market value is $20,000 each, and if they are kept for another 6 years, they can be sold for $2000 per cab. The annual maintenance costs for the cabs are $1000 per year. Green Cab has been approached about a leasing plan that would replace the cabs. The leasing plan calls for payments of $4500 per year. The annual maintenance costs for the leased cabs are $750 per year. Should the cabs be replaced if the interest rate is 10%?

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Microeconomics: Why should the cabs replaced if interest rate is ten percent
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