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You're considering buying an asset that has a 3-year life and costs $2,000. As an alternative to buying the asset, you can lease it for
You're considering buying an asset that has a 3-year life and costs $2,000. As an alternative to buying the asset, you can lease it for $600 per year (four annual payments, the first due today). Your bank is willing to lend you money for 15%. A) What is the purchase cash flow, and lease cash flow? B) What is the largest annual lease payment you would be willing to pay? (Hint: Use Goal Seek to find the answer). Please show how to do it in Excel and the formulas used.
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