Lease vs. Buy Option
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Company has the option to purchase equipment for $24,000, but can lease the same equipment for $5,000 per month for the next 6 years. Its WACC is 7.656% and has an equipment salvage of $1,000 at the end of 6 years. Which option should the company take?
a. Lease
b. Buy
c. Indifference
d. Not enough information to answer; cash flow from equipment is needed.
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The solution evaluates a lease vs. buy option.
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Company has the option to purchase equipment for $24,000, but can lease the same equipment for $5,000 per month for the next 6 years. Its WACC is 7.656% and has an equipment salvage of $1,000 at the end of 6 years. Which option should the company take?
a. Lease
b. Buy
c. Indifference
d. Not enough information to answer; cash flow from equipment is ...
Purchase this Solution
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