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Assume that a company is choosing between two alternatives-lease a piece of equipment for five years or buy a piece of equipment and sell
Assume that a company is choosing between two alternatives-lease a piece of equipment for five years or buy a piece of equipment and sell it in five years. The costs associated with the two alternatives are summarized as follows: Lease Buy Purchase cost of equipment $60,000 Annual operating costs $6,000 Immediate deposit $25,000 Annual lease payments $18,000 Salvage value (5 years from now) $ 12,000 3 pts Click here to view Exhibit 14B-1e and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided. If the company chooses the lease option, it will have to pay an immediate deposit of $25,000 to cover any future damages to the equipment. The deposit is refundable at the end of the lease term. The annual lease payments are made at the end of each year. Based on a net present value analysis with a discount rate of 24%, what is the financial advantage (disadvantage) of buying the equipment rather than leasing it? O $(6,003) $(3,513) $16,493) O $(7,323)
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