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A company needs a new piece of equipment which can be purchased today for $7,250. Alternatively, a leasing agreement is available that requires payments of
A company needs a new piece of equipment which can be purchased today for $7,250. Alternatively, a leasing agreement is available that requires payments of $192 at the beginning of each month for three years and provides a $1,500 option to buy the equipment at the end of three years. Interest is 8% compounded monthly. Using the discounted cash flow method (DCF), should the equipment be leased or purchased?
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