college can purchase a telephone system for $35000 or lease a system for 5 years for a front-end charge and regular payments of $1500 at the beginning of every quarter (including the first quarter). The system can be purchased at the end of the lease period for $3000 a) should the college lease or buy the system if it can borrow funds at 5% compounded quarterly? b) what is the current economic value of the saving with the lower cost option?
college can purchase a telephone system for $35000 or lease a system for 5 years for a front-end charge and regular payments of $1500 at the beginning of every quarter (including the first quarter). The system can be purchased at the end of the lease period for $3000 a) should the college lease or buy the system if it can borrow funds at 5% compounded quarterly? b) what is the current economic value of the saving with the lower cost option?
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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a college can purchase a telephone system for $35000 or lease a system for 5 years for a front-end charge and regular payments of $1500 at the beginning of every quarter (including the first quarter). The system can be purchased at the end of the lease period for $3000
a) should the college lease or buy the system if it can borrow funds at 5% compounded quarterly?
b) what is the current economic value of the saving with the lower cost option?
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