You work for NCA hospitals in New York that are contemplating leasing a diagnostic scanner machine (leasing is very common practice with expensive, high-tech equipment). The scanner costs €4,800,000, and it would be depreciated straight-line to zero over four years. Because of the short cycle of the technological equipment, the scanner will be completely valueless in four years. You can lease it for €1,430,000 per year for four years at a borrowing interest rate of 8% - ignore taxes for the purpose of this exercise.

Instructions:

Create a lease-versus-buy analysis. Calculate the NPV of leasing. Should you lease or buy? Explain your calculations in a detailed manner.

Answer rating: 100% (QA)

NPV of lease Cost of equipment PV of lease payments It i... View the full answer