As part of the Wellness CentER Project, the plan is to build a small gym on the rooftop of the hotel. You have been appointed to help the Sales and Marketing manager to make decision whether to rent or buy specific equipment items. The required items are included in Appendix 1 together with costing information.

The budget for the required equipment is $45,550 for the life of the equipment. The useful life of the equipment is predicted to be 3 years after which it will need to be replaced. At the end of its useful life, it is expected to be sold for the residual value of 6% of its original cost. From the renting options, choose the one that is the most beneficial for the business. The rent is expected to rise by 4% each year. The rent is paid at the beginning of each period. Servicing of the equipment is included in the rent.

Assume that servicing its own equipment will cost the hotel additional $600 every year over the period of its useful life. Assume that servicing is done and paid at the end of each year.

REQUIRED

The manager would like to know whether it would be better for the Hotel to buy the required equipment or to rent it. Explore both options and make a recommendation. Take into account the time value of money at the discount rate of 8%. Include advantages and disadvantages of each option and justify your choice.

UNIVERSITIES APPENDIX 1 GYM EQUIPMENT REQUIREMENTS Treadmill Hire Price 3 months: $697 Quantity required: 3 (per item) 6months: $1141 12 months: $1970 Purchase Price (per item): $6057 Elliptical Trainer Hire Price:3 months: $379 Quantity required: 2 (per item)6 months: $555 12 months: $1010 Purchase Price (per item): 54039 Exerche Bike Hire Price 3 months: $351 Tuantity required 4 (per item) 6 months: $530 12 months: 5904 Purchase Price (per item): $3332 Rowing Machine Mire Price: 3 months: 5278 Quanuty required 1 (per item) 6 months:$455 12 months: $838 Purchate Price (per item) $2726 TASK 1 As part of the wellness Centre Project, the plan is to build a sumaill aym on the rooftop of the hotel. You have been appointed to help the Sales and Marketing manager to make decision whether to rent or buy specfic equipment items. The required items are included in Appendix 1 together with coting information The budget for the required equipment SA5550 for the life of the equipment The useful lide of the equipment is predicted to be 3 years afer which it will need to be replaced. At the end of its useful life, it is e, pected to be ald for the residual value of 6% of its original cost. From the renting options, choose the one that is the most beneficial for the business The rent is expected to rise by 4% each year. The rent is paid at the beginning of each periad. Servicing of the equipment is included in the rent Assume that servicing its own equipment will cost the hotel additional $600 every year over the period of itsuseful life Auume that servicing is done and paid at the end of each year REQUIRED The manager would like to knos whether in would be better for the Hatel to buy the required equipment or to rent it. Explore both aptions and make a recommendation Take into account the time value of money at the disxcount rate of 8% Include advantages and disadvantages of each option and justify your choice UNIVERSITIES APPENDIX 1 GYM EQUIPMENT REQUIREMENTS Treadmill Hire Price 3 months: $697 Quantity required: 3 (per item) 6months: $1141 12 months: $1970 Purchase Price (per item): $6057 Elliptical Trainer Hire Price:3 months: $379 Quantity required: 2 (per item)6 months: $555 12 months: $1010 Purchase Price (per item): 54039 Exerche Bike Hire Price 3 months: $351 Tuantity required 4 (per item) 6 months: $530 12 months: 5904 Purchase Price (per item): $3332 Rowing Machine Mire Price: 3 months: 5278 Quanuty required 1 (per item) 6 months:$455 12 months: $838 Purchate Price (per item) $2726 TASK 1 As part of the wellness Centre Project, the plan is to build a sumaill aym on the rooftop of the hotel. You have been appointed to help the Sales and Marketing manager to make decision whether to rent or buy specfic equipment items. The required items are included in Appendix 1 together with coting information The budget for the required equipment SA5550 for the life of the equipment The useful lide of the equipment is predicted to be 3 years afer which it will need to be replaced. At the end of its useful life, it is e, pected to be ald for the residual value of 6% of its original cost. From the renting options, choose the one that is the most beneficial for the business The rent is expected to rise by 4% each year. The rent is paid at the beginning of each periad. Servicing of the equipment is included in the rent Assume that servicing its own equipment will cost the hotel additional $600 every year over the period of itsuseful life Auume that servicing is done and paid at the end of each year REQUIRED The manager would like to knos whether in would be better for the Hatel to buy the required equipment or to rent it. Explore both aptions and make a recommendation Take into account the time value of money at the disxcount rate of 8% Include advantages and disadvantages of each option and justify your choice