in option 2 (lease), payments of 90,000 are at the beginning of each year for 5 years, not the end of the year.

You own a construction company and need to need a generator for one of your projects in a remote area. The expected life of the generator is 5 years. You have two options. Option 1 - Buy The purchase price is AED 500,000. Annual fuel costs are AED 20,000. Annual maintenance costs are AED 10,000. The salvage value is AED 100,000. The generator will require a major overhaul after the third year costing an additional AED 50,000. Option 2 - Lease The lease payments are AED 90,000 at the beginning of each year for 5 years. The fuel costs are the same but all maintenance costs are covered by the lease contract. However you would be required to pay an installation cost of AED 60,000. At the end of the 5-year period there would be a removal cost of AED 30,000 At an interest rate of 9% perform a lease/buy analysis and recommend which option is better