Question 4

As a side discussion at the meeting, another member of the management team has inquired as to whether the firm would be better off leasing the $10,000,000 of new equipment for another facility rather than borrowing and purchasing a bunch of assets that will only lose value. Your very able assistant has prepared the input data for the cash flow analysis spreadsheet in Appendix 3 for you to use in your response to your colleagues regarding a lease versus purchase decision. Be sure to compute and reference specific values and provide a detailed explanation to support your recommendation. Note calculations are required to obtain an appropriate answer. Additionally, you should be clear in your explanation as how to residual or salvage value risk will potentially impact this deal conceptually

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