Assume zero taxes. Equipment can be leased at $10,000 per year (first payment one year hence) for ten years or purchased at a cost of $64,177. The company has a weighted average cost of capital of 15 percent. A bank has indicated that it would be willing to make a loan of $64,177 at a cost of 10 percent. Should the company buy or lease? The equipment will be used for ten years. There is zero salvage value.

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Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.