The Old School is trying to decide whether they should purchase or lease a new high-speed photocopier machine. It will cost the school $ 14,000 to purchase the copier and $ 750 each year to maintain the machine over the course of its six- year useful life. At the end of the sixth year, Old School expects to be able to sell the copier for $ 1,000. A dealer has offered to lease the school the same copier for a payment of $ 750 at the beginning of the lease plus lease payments of $ 3,450 per year for four years. Lease payments include all maintenance. The dealer was unable to offer a lease longer than four years. Lease payments would be made at the end of each year. If the Old School’s discount rate is 8 percent which alternative should it choose and why?
A. Solve using a spreadsheet program such as Excel.
B. Solve using a financial calculator (optional).

  • CreatedDecember 19, 2014
  • Files Included
Post your question