A company is considering leasing or buying a piece of equipment.Buying:•Purchase Price: $500,000•Useful Life: 8...
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Accounting
A company is considering leasing or buying a piece of equipment.
Buying:
•Purchase Price: $500,000
•Useful Life: 8 years
•Annual Maintenance: $10,000
Leasing:
•Annual Lease Payments: $80,000
•Lease Term: 8 years
Requirements:
1.Calculate the total cost of buying the equipment.
2.Calculate the total cost of leasing the equipment.
3.Determine the NPV of both options using a discount rate of 5%.
4.Advise on the more cost-effective option based on the NPV.
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