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Roofing Company wants to purchase equipment costing $275,000 today.It is expected that Roofing Company would lease out this equipment for the next 5 years.Roofing Company
Roofing Company wants to purchase equipment costing $275,000 today.It is expected that Roofing Company would lease out this equipment for the next 5 years.Roofing Company would get paid $75,000 each year with the first payment being made at the beginning of the lease period. The coupon rate is 7%.
Requirement:Determine if it makes sense for Roofing Company to purchase and then lease this equipment especially since the equipment's useful life is 5 years.Explain your position with workings.
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