Net Present Value of the Leasing Alternative Assignment


Net Present Value of the Leasing Alternative

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$10,500 per year if you sign a guaranteed 55​-year lease​ (the lease is paid at the end of each​ year). 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 55 years). If your discount rate is 6.7 %6.7%​, what should you​ do?

Year 0Year 1Year 2Year 3Year 4Year 5
negative $ 40 comma 800−$40,800negative $ 2 comma 000−$2,000negative $ 2 comma 000−$2,000negative $ 2 comma 000−$2,000negative $ 2 comma 000−$2,000negative $ 2 comma 000−$2,000

Net Present Value of the Leasing AlternativeThe net present value of the leasing alternative is ​$nothing. (Round to the nearest​ dollar.) Get Finance homework help today

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