Chiwen, Inc is considering whether to replace an office copy machine with a new model The manager is trying to decide whether to buy the machine outright or lease it from a copier company He has generated the following information about the two options Purchase Option Lease Option Purchase price $ 25,000 Annual lease payment (includes all supplies and maintenance) $ 7,000 Annual operating costs (paper, toner, maintenance, etc ) $ 2,000 Useful life 5 years Contract length 5 years Salvage value $ 5,000 Chiwens discount rate is 12 percent Should the company lease or buy the copier

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Question: Chiwen, Inc. is considering whether to replace an office copy machine with a new model. The manager is trying to decide whether to buy the

Chiwen, Inc. is considering whether to replace an office copy machine with a new model. The manager is trying to decide whether to buy the machine outright or lease it from a copier company. He has generated the following information about the two options.

Purchase Option		Lease Option
Purchase price	$ 25,000	Annual lease payment (includes all supplies and maintenance)	$ 7,000
Annual operating costs (paper, toner, maintenance, etc.)	$ 2,000
Useful life	5 years	Contract length	5 years
Salvage value	$ 5,000

Chiwens discount rate is 12 percent. Should the company lease or buy the copier?

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