Net Present Value of Leasing Alternative Assignment
You need a particular piece of equipment for your production process. An equipment-leasing company has offered to lease the equipment to you for $ 10 comma 500 per year if you sign a guaranteed 5-year lease (the lease is paid at the end of eachyear). The company would also maintain the equipment for you as part of the lease.
Alternatively, you could buy and maintain the equipment yourself. The cash flows from doing so are listed below(the equipment has an economic life of 5 years). If your discount rate is 6.7 %, what should you do?
Year 0 – $ 40,800
Year 1 -$ 2,000
Year 2 -$ 2,000
Year 3 -$ 2,000
Year 4 -$ 2,000
Year 5 -$ 2,000
The net present value of the leasing alternative is $ nothing. (Round to the nearest dollar.) Get Academic Writing Services