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    Kiwilove's Avatar
    Kiwilove Posts: 2, Reputation: 1
    New Member
    		  
    #1

    Jan 17, 2009, 10:29 PM
    Finance math issue
    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!
    codyman144's Avatar
    codyman144 Posts: 544, Reputation: 31
    Senior Member
    		  
    #2

    Jan 18, 2009, 12:05 AM

    Salvage value is what the machine will be worth after 6 years or its useful life. I would help you work though the problem but at least go about trying to slove it and I can give you some hints.

    No one on this site is out here to do your work for you.
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