Question

A company is considering whether to purchase or lease a piece of equipment for an upcoming project. the cost to purchase is $10,000 plus $100 per day to operate or $500 per day to lease (including operating costs). if the company anticipates using the equipment for a total of 20 days, they will be indifferent as to whether or lease or purchase it. true

Answer 1

Total cost if they purchase the equipment = 10,000 + 100(20) = 10,000 + 2,000 = 12,000

Total cost if the lease the equiplment = 500(20) = 10,000

The total cost of leasing the equipment is less than the total cost of purchasing the equipment, therefore, the company should lease the equipment.