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For his business, Michael needs to obtain a new printer.He needs to decide if he should purchase the printer or lease it.The salesman provided Michael
For his business, Michael needs to obtain a new printer.He needs to decide if he should purchase the printer or lease it.The salesman provided Michael with the following information about the finance and lease options available, noting an interest rate of4.6%compounded annually.Michael passed this information along to this financial planner.(Do not forget thatHST of 13%applies.)
DescriptionLeasing the PrinterFinancing the PrinterManufacturer's Suggested Retail Price$28,200$28.200Term (in months)4242Residual Payment to Purhcase$11,000
- What are Michael's monthly payments if he decides toleasethe printer?
- What are Michael's monthly payments if he decides tofinancethe printer?
- The lease contract includes an option to purchase the printer at the end of the term by paying the residual value.If Michael decides to purchase the printer at the end of the lease contract, he is offered the incentiveof purchasing for a residual value of$9,000instead of $11,000.What is the cost of purchasing the printer today
- Notes:1.That is, calculate the PV of the lease payments and PV of the residual value.2.Since Michael is paying the residual value to complete the purchase, 13%HST must be added to the residual value)
- Which option (#3 leasing and buying at end of term or #2 financing) makes the most sense financially?
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