Explore BrainMass
Share

Explore BrainMass

    Leasing vs. Buying

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    What risks and uncertainties should be considered while making a lease vs. buy decision? How do these risks and uncertainties impact capital budgeting? What is the advantage of computing the present value of outflows in making lease vs. buy decisions? In what circumstances is a capital lease a better alternative to an operating lease? Under what circumstances is a capital lease a better alternative than buying an asset? How do qualitative factors like the condition of an asset impact a final lease or buy decision?

    © BrainMass Inc. brainmass.com October 9, 2019, 6:36 pm ad1c9bdddf
    https://brainmass.com/business/leasing/leasing-vs-buying-92553

    Solution Preview

    What risks and uncertainties should be considered while making a lease vs. buy decision? How do these risks and uncertainties impact capital budgeting?

    Some of the risks and uncertainties are:

    Technology Risk Management

    Many labs and production lines require the latest test technology to develop and produce competitive products. The rate of new test-product introductions and upgrades is increasing, reducing the useful life of the asset at your company. Thus, before making a lease or buy decision, one needs to consider the probability of obsolesence of the asset being purchased or leased. In other words, there is a high degree of risk and uncertainty with respect to the potential useful life of the asset.

    Asset Management

    The maturity and reliability of your company's asset-management procedures should have a significant impact on the acquisition decision. It should influence the lease vs buy model as well.

    Asset management requires accurate forecasting, active management of utilization, and recycling of test assets. Lack of a reliable process in any of these areas negatively impacts the validity of any lease vs buy analysis ...

    Solution Summary

    What risks and uncertainties should be considered while making a lease vs. buy decision? How do these risks and uncertainties impact capital budgeting? What is the advantage of computing the present value of outflows in making lease vs. buy decisions? In what circumstances is a capital lease a better alternative to an operating lease? Under what circumstances is a capital lease a better alternative than buying an asset? How do qualitative factors like the condition of an asset impact a final lease or buy decision?

    $2.19