Question: Your company needs a small front-end loader for handling bulk materials at the Wide place plant. It can be leased from the dealer for three years for $4050 per year including all maintenance. It can also be purchased for $14,000. You expect the loader to last for six years and to have a salvage value of $3000. You predict that maintenance will cost $400 the first year and increase by $200 per year in each year after the first. Your MARR is 15% per year.
(a) Use AW analysis to determine whether to lease or buy the loader.
(b) What is the shortest project life for which the AW you have calculated is exactly correct?