14 Aug Lease vs. Buy Options
How do you determine whether you should lease or buy a piece of equipment for your business?
Let's assume you're faced with the following lease-or-buy decision:
You can purchase a $50,000 piece of equipment by putting 25 percent down and paying off the
balance at 10 percent interest with four annual installments of $11,830. The equipment will be
used in your business for eight years, after which it can be sold for scrap for $2,500.
The alternative is that you can lease the same equipment for eight years at an annual rent of
$8,500, the first payment of which is due on delivery. You'll be responsible for the equipment's
maintenance costs during the lease.
You expect that your combined federal and state income tax rate will be 40 percent for the entire
period at issue. You further assume that your cost of capital is 6 percent (the 10 percent financing
rate adjusted by your tax rate).
EXERCISE
Using a cash flow analysis, make a lease-or-buy decision.
Note: Even if cost isn't your sole criterion, a cash flow analysis is useful because it can show you
how much you're paying for non-cost factors that may dictate your decision to lease.
Our website has a team of professional writers who can help you write any of your homework. They will write your papers from scratch. We also have a team of editors just to make sure all papers are of HIGH QUALITY & PLAGIARISM FREE. To make an Order you only need to click Ask A Question and we will direct you to our Order Page at WriteDemy. Then fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Fill in all the assignment paper details that are required in the order form with the standard information being the page count, deadline, academic level and type of paper. It is advisable to have this information at hand so that you can quickly fill in the necessary information needed in the form for the essay writer to be immediately assigned to your writing project. Make payment for the custom essay order to enable us to assign a suitable writer to your order. Payments are made through Paypal on a secured billing page. Finally, sit back and relax.
About Wridemy
We are a professional paper writing website. If you have searched a question and bumped into our website just know you are in the right place to get help in your coursework. We offer HIGH QUALITY & PLAGIARISM FREE Papers.
How It Works
To make an Order you only need to click on “Place Order” and we will direct you to our Order Page. Fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Are there Discounts?
All new clients are eligible for 20% off in their first Order. Our payment method is safe and secure.