I need help getting started on my paper. I need to describe the factors that need to be considered if a company was looking to purchase new equipment and they were going to lease the equipment versus buying the equipment.© BrainMass Inc. brainmass.com October 25, 2018, 5:18 am ad1c9bdddf
BUYING VS LEASING OF EQUIPMENT: FACTORS TO BE CONSIDERED
Lease is a way by which a firm obtains equipment in return to contractual and periodic payments that may be tax deductible. Lease does not provide transfer of ownership from the lessor to the lessee.
Purchasing is obtaining ownership of equipment in return to an amount as agreed between the buyer and the seller.
In coming up with decisions as to whether needed equipment must be bought or purchased, the following factors may be considered and would help in coming up with the decision:
1. Available fund or capital. If the business owner or the firm has limited capital, a better option would be to lease the equipment. Leasing does not require a business owner to have large initial outflow in order to obtain equipment. For an established business with adequate and ready capital for the ...
Leasing equipment versus buying equipment are examined.
Finance Problem: Lease vs. Purchase Equipment
Andiola Corporation is evaluating whether to lease or purchase equipment. Its tax rate is 30 percent. If the company purchases the equipment for $900,000, it will depreciate it over 5 years, using straight-line depreciation. If the company enters into a 5-year lease, the lease payment is $200,000 per year, payable at the beginning of each year. If the company purchases the equipment it will borrow from its bank at an interest rate of 11 percent.
Please answer the following:
a. Calculate the cost of purchasing the equipment.
b. Calculate the cost of leasing the equipment.
c. Calculate the net advantage to leasing.
Should the company purchase or lease the equipment?View Full Posting Details