Shoe Building Inc. $($SBI$)$ has been offered an operating lease on the same equipment. The four$-$year lease requires end$-$of$-$year payments of $$1,200,$ and the firm will have the option to buy the asset in four years for $$7,500.$ The firm will want to use the equipment longer than four years, so it plans to exercise this option. All maintenance will be provided by the lessor. What is the NPV cost of leasing the asset?

$-$$$12,608\mathrm{.}60$

$-$$$12,173\mathrm{.}69$

$-$$$10,086\mathrm{.}88$

$-$$$2,826\mathrm{.}31$

Should SBI lease or buy the equipment?

Buy

Lease