Question
Randall Corp. is trying to decide whether to lease or purchase a piece of equipment needed for the next five years. The equipment would cost
Randall Corp. is trying to decide whether to lease or purchase a piece of equipment needed for the next five years. The equipment would cost $165,000 to purchase, and maintenance costs would be $75,000 per year. After five years, Randall estimates it could sell the equipment for $95,000. If Randall leases the equipment, it would pay $95,000 each year, which would include all maintenance costs. If the hurdle rate for Randall is 12%, Randall should: (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Use appropriate factor from the PV tables. Do not round intermediate calculations. Round your final answer to the nearest hundred.)
Multiple Choice
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lease the equipment, as net present value of cost is about $39,000 less.
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buy the equipment, as net present value of cost is about $39,000 less.
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lease the equipment, as net present value of cost is about $95,000 less.
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buy the equipment, as net present value of cost is about $95,000 less.
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