Carl Williams does custom wheat combining in southern Alberta. He will purchase either a new Massey or a new Deere combine to replace his old machine. The Massey combine costs $190,000, and the Deere combine costs $156,000. Their trade-in values after six years would be about $50,000 and $40,000, respectively. Because the Massey cuts an 18-foot swath versus the Deere's 15-foot swath, Carl estimates that his annual profit with the Massey will be 10% higher than the $70,000 he could make with the Deere. The Massey equipment dealer will provide 100% financing at 11% per annum, and the Deere dealer will approve 100% financing at 10% per annum. Which combine should Carl purchase? How much more, in current dollars, is the better alternative worth?

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The Answer of Carl Williams does custom wheat combining in southern Alberta. He will purchase either a new Massey or a new Deere combine to replace his old machine. The Massey combine costs $190,000, and the Deere combine costs $156,000. Their trade-in values after six years would be about $50,000 and $40,000, respectively. Because the Massey cuts an 18-foot swath versus the Deere's 15-foot swath, Carl estimates that his annual profit with the Massey will be 10% higher than the $70,000 he could make with the Deere. The Massey equipment dealer will provide 100% financing at 11% per annum, and the Deere dealer will approve 100% financing at 10% per annum. Which combine should Carl purchase? How much more, in current dollars, is the better alternative worth?

Carl Williams Does Custom Wheat Combining in Southern Alberta