A company has the following alternatives on some real estate that it needs for its new plant.
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Question:
A company has the following alternatives on some real estate that it needs for its new plant. It can lease the facility for $10,000 a month for 15 years, or it can buy the facility now for $800,000. The company’s weighted average cost of capital is 12% and payments are made at the end of each month.
Based on this information, answer the following:
• Which is cheaper for the company: to buy or lease real estate? Show your computations.
Related Book For
Cornerstones of Cost Management
ISBN: 978-1285751788
3rd edition
Authors: Don R. Hansen, Maryanne M. Mowen
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