Buy vs. Lease: You are a newly appointed CFO of a high frequency trading firm. You need a supercomputer to perform all trading calculations. The project will last for ten years. You are asked to determine if it is best to Lease or Buy the supercomputer. These options are: Lease: The cost to lease a supercomputer is $50,000 per year from T=1 to T=10. The lease includes all maintenance costs. Buy: The supercomputer costs $250,000 today at T=0. The maintenance cost will be $1,000 per year for T=1 to T=10. At year T=10 you will be able to sell the supercomputer for $100,000. Which option would you select if R=5%? Show all work.
Buy vs. Lease: You are a newly appointed CFO of a high frequency trading firm. You need a supercomputer to perform all trading calculations. The project will last for ten years. You are asked to determine if it is best to Lease or Buy the supercomputer. These options are: Lease: The cost to lease a supercomputer is $50,000 per year from T=1 to T=10. The lease includes all maintenance costs. Buy: The supercomputer costs $250,000 today at T=0. The maintenance cost will be $1,000 per year for T=1 to T=10. At year T=10 you will be able to sell the supercomputer for $100,000. Which option would you select if R=5%? Show all work.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Buy vs. Lease: You are a newly appointed CFO of a high frequency trading firm. You need a supercomputer to perform all trading calculations. The project will last for ten years. You are asked to determine if it is best to Lease or Buy the supercomputer.
These options are:
Lease: The cost to lease a supercomputer is $50,000 per year from T=1 to T=10. The lease includes all maintenance costs.
Buy: The supercomputer costs $250,000 today at T=0. The maintenance cost will be $1,000 per year for T=1 to T=10. At year T=10 you will be able to sell the supercomputer for $100,000.
- Which option would you select if R=5%? Show all work.
- Which option would you select if R=20%? Show all work?
- What interest rate R results in the same present value for the Buy and Lease options?
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