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This posting addresses the Wisbley Co. purchase decision.

The Wisbley Company is contemplating the purchase of a helicopter for its executives to use in their business trips. This helicopter could be either purchased or leased from the manufacturer. The useful life of the helicopter is four years. Data concerning these two alternatives follow:

Purchase:
purchase price - $900,000
annual cash payments for service and licenses - $10,000
cash payments for repairs at end of the second year - $6,000
cash payments for repairs at end of the third year - $8,000
Salvage value - $270,000

Lease:
Annual rental payment - $250,000

If the helicopter is leased, it would be returned to the manufacturer in four years. Wisbley's required rate of return is 22%. Help Wisbley decide whether to buy or lease the helicopter.

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(The appropriate steps are also included in an attached word document.)

The Wisbley Company is contemplating the purchase of a helicopter for its executives to use in their business trips. This helicopter could be either purchased or leased from the manufacturer. The useful life of the helicopter is four years. Data concerning these two alternatives follow:

Purchase:
purchase price - ...

Solution Summary

The solution provides a breakdown of the Wisbley Company's purchase vs. lease decision, and shows which option is the best decision based on the required rate of return.

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