Lease vs. purchase
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Can you please help me with this assignment. Please answer questions #2, #3 and #8. Please use the attached excel spreadsheet to support the analysis. Show all of your supporting works in Excel.
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The solution has the solution to the Agro-chem case relating to lease vs purchase
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2. Should Agro-Chem lease or purchase the equipment? Assume that, if the decision is made to purchase the equipment, it will be sold for its book value on the first day of Year 5; hence the full Year 4 depreciation can be taken. Further, use the 12.0 percent before-tax (7.2 percent after-tax) cost of debt as the residual value discount rate. (Hint: Use Part A of Table 1 as a guide.)
Based on the excel file calculation, it is better to lease the equipment as the PV of cost of leasing is better than the PV of cost of ...
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