• Given the information below, answer the question.

Sunshine Hotel needs new laundry equipment. There are two alternatives, either buy or lease the equipment. The hotel owner is asking your recommendation to pay less for the equipment.

	Buy ($)	Lease ($)
Cost of equipment	20,000
Semi-annual equipment rental		3,000
Salvage value after five years	1,000
Annual costs:
Labor	15,000	15,000
Supplies	1,000	1,000
Utilities	3,000	3,000
Interest expense	1,500	-
Repairs	200	-

Prepare a five-year cost schedule for each alternative (Include only relevant costs).

What is the cost if the owner buys or leases the equipment?

A. Buy: $ 28,500; Lease: $15,000

B. Buy: $ 27,000; Lease: $30,000

C. Buy: $ 27,500; Lease: $30,000

D. Buy: $ 25,100; Lease: $18,000