You need a particular piece of equipment for your production process. An equipment-leasing company has offered to lease the equipment to you for $10,100 per year if you sign a guaranteed 5-year lease (the lease is paid at the end of each year). The company would also maintain the equipment for you as part of the lease. Alternatively, you could buy and maintain the equipment yourself. The cash flows from doing so are listed here: (the equipment has an economic life of 5 years). If your discount rate is 6.5%, what should you do? Data table (Click on the following icon in order to copy its contents into a spreadsheet.) Year 0 -$40,600 Year 1 -$2,100 Year 2 - $2,100 Year 3 Year 4 Year 5 - $2,100 - $2,100 - $2,100 Print Done
You need a particular piece of equipment for your production process. An equipment-leasing company has offered to lease the equipment to you for $10,100 per year if you sign a guaranteed 5-year lease (the lease is paid at the end of each year). The company would also maintain the equipment for you as part of the lease. Alternatively, you could buy and maintain the equipment yourself. The cash flows from doing so are listed here: (the equipment has an economic life of 5 years). If your discount rate is 6.5%, what should you do? Data table (Click on the following icon in order to copy its contents into a spreadsheet.) Year 0 -$40,600 Year 1 -$2,100 Year 2 - $2,100 Year 3 Year 4 Year 5 - $2,100 - $2,100 - $2,100 Print Done
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter19: Lease Financing
Section: Chapter Questions
Problem 1P: Reynolds Construction (RC) needs a piece of equipment that costs 200. RC can either lease the...
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
Transcribed Image Text:You need a particular piece of equipment for your production process. An equipment-leasing company has offered to lease the equipment to you for $10,100 per year if you sign a guaranteed 5-year lease (the
lease is paid at the end of each year). The company would also maintain the equipment for you as part of the lease. Alternatively, you could buy and maintain the equipment yourself. The cash flows from doing so
are listed here: (the equipment has an economic life of 5 years). If your discount rate is 6.5%, what should you do?
Data table
(Click on the following icon in order to copy its contents into a spreadsheet.)
Year 0
-$40,600
Year 1
-$2,100
Year 2
- $2,100
Year 3
Year 4
Year 5
- $2,100
- $2,100
- $2,100
Print
Done
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