Lease vs. Purchase Options
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Prepare a paper comparing and contrasting lease verses purchase options. In your paper, discuss the following questions:
- What is debt financing? Provide at least two examples.
- What is equity financing? Provide at least two examples.
- Which alternative capital structure is more advantageous? Why?
Format your paper consistent with APA guidelines. Be sure to properly cite your references. If you used an electronic source, include the URL. If you used a printed source, attach a copy of the data to your paper
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Solution Summary
This solution compares and contrasts lease vs. purchase options. It explains and gives examples of debt financing and equity financing. Also, it explains which alternative capital structure is more advantageous and why. APA references are included.
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Here you go- please let me know if you have any questions.
Lease verses purchase options are dependent upon the company's financial state. A business, which leases real estate or equipment, may be rewarded with favorable terms when the market is glutted with supply, and if the company has a proven track record. Companies may also lease to own, by putting money down and using payments towards the purchase. The decision to lease or own depends in part on the opportunity cost of ownership, the future needs of the company, and the economic incentives.
For instance, in deciding to lease or own, one must consider the depreciation of the item. If the item is likely to depreciate quickly it might be wise to lease rather than own. Or, conversely, if it will go up in value, it would seem logical to purchase. The needs of the company should be considered, and if the item has long-term value for the company, looking down the line as the company expands, it would seem logical to buy. Maintenance costs should be considered, particularly concerning equipment. Often lease agreements include a maintenance program as part of the contract. The items involved might also effect the lease/purchase decision. A company ...
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