Question 03: As an alternative to purchasing the new printer, it is possible to lease the digital printer. The lease will be a financial one and a payout figure of $8,240 will be required at the end of 5 years. The yearly repayments will be $35,000 paid at the beginning of each year in advance. The annual payment will also cover the cost of the maintenance contract

Required (Calculations using Excel Spreadsheet):

a. Advise management whether the lease is a better option.

b. Define lease. What are the characteristic of a lease?

c. What is the fundamental difference between an operating lease and a financial lease?

d. What is the main disadvantage of leasing?

e. Define financial leverage.