Question
Your landscaping company can lease a truck for $9,000 a year (paid at year-end) for 7 years. It can instead buy the truck for $48,000.
Your landscaping company can lease a truck for $9,000 a year (paid at year-end) for 7 years. It can instead buy the truck for $48,000. The truck will be valueless after 7 years. The interest rate your company can earn on its funds is 8%.
a.What is the present value of the cost of leasing?
b.Is it cheaper to buy or lease?
c.What is the present value of the cost of leasing if the lease payments are an annuity due, so the first payment comes immediately?
d.Is it now cheaper to buy or lease?
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Financial Reporting Financial Statement Analysis And Valuation A Strategic Perspective
Authors: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
9th Edition
1337614689, 1337614688, 9781337668262, 978-1337614689
