Question
Heidi Inc. is considering whether to lease or purchase a piece of equipment. The total cost to lease the equipment will be $120,000 over its
Heidi Inc. is considering whether to lease or purchase a piece of equipment. The total cost to lease the equipment will be $120,000 over its estimated life, while the total cost to buy the equipment will be $75,000 over its estimated life. At Heidi's required rate of return, the net present value of the cost of leasing the equipment is $73,700 and the net present value of the cost of buying the equipment is $68,000. Based on financial factors, Heidi should
A. lease the equipment, saving $45,000 over buying.
B. buy the equipment, saving $45,000 over leasing.
C. lease the equipment, saving $5,700 over buying.
D. buy the equipment, saving $5,700 over leasing.
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