Question
Heidi Incorporated is considering whether to lease or purchase a piece of equipment. The total cost to lease the equipment will be $125,000 over its
Heidi Incorporated is considering whether to lease or purchase a piece of equipment. The total cost to lease the equipment will be $125,000 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 $80,900 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 $45,000 over leasing.
buy the equipment, saving $5,900 over leasing.
lease the equipment, saving $45,000 over buying.
lease the equipment, saving $5,900 over buying.
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