LM 12 Lease vs Buy

Extra Problems

Problem 1:

You are the CFO of a business and have three different options for purchasing a piece of equipment to expand your current production capacity. Show your calculations and pick the best deal.

	Buy	Lease Option 1	Lease Option 2
Cost/Down payment	$ 800,000	$ 50,000	$ 10,000
Interest Rate	10%
Term (years)		3	5
Annual Payment		$ 300,000	$ 200,000
Purchase amount at end of lease	$	$ 25,000	$ 75,000

Problem 2:

You are the CFO of a business and have three different options for purchasing a building to expand your corporate headquarters. Show your calculations and pick the best deal.

	Buy	Lease Option 1	Lease Option 2
Cost/Down payment	$ 1,600,000	$ 150,000	$ 100,000
Interest Rate	7%
Term (years)		5	7
Annual Payment		$ 340,000	$ 250,000
Purchase amount at end of lease	$	$ 125,000	$ 175,000