Kiwilove
Jan 17, 2009, 10:29 PM
Okay, I need help with this question::confused:
Buy or Lease:
A company is considering the possibility of acquiring new computer equipment for $400 000 cash. The salvage value (what is that?) is estimated to be $50 000 at the end of the 6-year life of the equipment. Maintenance costs will be $4000 per month, payable at the end of each month. The company could lease the equipment for $12 000 per month payable at the end of each month. Under the 6-year lease agreement the lessor would pay the maintenance costs. If the company can earn 18% per annum, compounded monthly, on its capital, advise the company whether to BUY or LEASE.
(P.S.: this is a Gr.11 finance math "challenge" question)
please answer the best as you can! If not that's fine :)
Thank you!
Buy or Lease:
A company is considering the possibility of acquiring new computer equipment for $400 000 cash. The salvage value (what is that?) is estimated to be $50 000 at the end of the 6-year life of the equipment. Maintenance costs will be $4000 per month, payable at the end of each month. The company could lease the equipment for $12 000 per month payable at the end of each month. Under the 6-year lease agreement the lessor would pay the maintenance costs. If the company can earn 18% per annum, compounded monthly, on its capital, advise the company whether to BUY or LEASE.
(P.S.: this is a Gr.11 finance math "challenge" question)
please answer the best as you can! If not that's fine :)
Thank you!