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You are asked by the CEO of your company to conduct an analysis to determine if there is a benefit to leasing vs . buying
You are asked by the CEO of your company to conduct an analysis to determine if there is a benefit to leasing vs buying the equipment the company needs to expand production. You are provided with the following information.
If the equipment is leased, the company will pay $ per year for the next four years. Maintenance of the equipment will be included in the lease agreement.
If the equipment is purchased, the company will borrow the funds needed. The equipment will cost $ million. The company is able to borrow the funds needed at a rate of The equipment will be depreciated fully for four years at the following rates and The equipment will have a residual value of $ by the end of the fourth year. To maintain the equipment, the company will purchase a maintenance contract at a cost of $ per year paid at the beginning of each year. The company enjoys a tax rate.
What is the present value of leasing?
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