Your company is trying to decide whether it should purchase a copier from Xerox or lease it. The copier has an expected life of 6 years, after which it has only marginal value (you can ignore any residual value). If you purchase it, the price is $145,000, payable now, and you would have to pay an annual service charge of $8,000. If you lease it, you would have an annual payment of $36,000 each year (for 6 years), which includes service. The lease payment and the annual service charge occur at the beginning of each year. The interest rate is 3.8%. Which option is least costly?
Your company is trying to decide whether it should purchase a copier from Xerox or lease it. The copier has an expected life of 6 years, after which it has only marginal value (you can ignore any residual value). If you purchase it, the price is $145,000, payable now, and you would have to pay an annual service charge of $8,000. If you lease it, you would have an annual payment of $36,000 each year (for 6 years), which includes service. The lease payment and the annual service charge occur at the beginning of each year. The interest rate is 3.8%. Which option is least costly?
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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Your company is trying to decide whether it should purchase a copier from Xerox or lease it. The copier has an expected life of 6 years, after which it has only marginal value (you can ignore any residual value). If you purchase it, the price is $145,000, payable now, and you would have to pay an annual service charge of $8,000. If you lease it, you would have an annual payment of $36,000 each year (for 6 years), which includes service. The lease payment and the annual service charge occur at the beginning of each year.
The interest rate is 3.8%. Which option is least costly?
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