Heidi Inc. is considering whether to lease or purchase a piece of equipment. The total cost to lease the equipment will be $127,000 over its estimated life, while the total cost to buy the equipment will be $80,000 over its estimated life. At Heidis required rate of return, the net present value of the cost of leasing the equipment is $81,500 and the net present value of the cost of buying the equipment is $75,000. Based on financial factors, Heidi should:

Multiple Choice

• buy the equipment, saving $47,000 over leasing.

• lease the equipment, saving $6,500 over buying.

• lease the equipment, saving $47,000 over buying.

• buy the equipment, saving $6,500 over leasing.