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Investment in Leasing or Purchasing

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A corporation may obtain a machine by leasing it for six years (the useful life), paying an annual fee of $3,000, or by purchasing it for $12,000. Which alternative is preferable if the corporation can invest money at 8% per annum (i.e., its cost of capital is 8%)?

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Solution Summary

The solution discusses which alternative is preferable, investment in leasing or purchasing.

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If the corporation leases out at $3000 for six years,
total payment = 6*$3000 = ...

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