The biggest concerns or risks with purchasing technology are the rapid changes that happen in technology and the low end-of-life value of technology. Therefore, there is a 40 percent chance that the leased equipment will have better contractual value at the end of the lease period. Alternatively, there is an 85 percent chance that purchasing new technology will have a lower-than-expected value at the end of the project life. The cost for the technology, if leased, is $11,500, versus the cost of purchasing a new technology, which is $15,000.

Cost to buy a new technology	$15,000
Probability of having lower-than-expected value at the end of the project life.	85%
The probability that the leased equipment will have better contractual value at the end of the lease period.	40%
Cost of maintenance for the new equipment.	$5,000
Cost of maintenance for the leased equipment.	$2,500

Use the information in the table below to decide whether you want to lease versus buy new technology.
Calculate the expected value of each outcome and show your calculations (Probability X Impact).
Explain the best option based on the outcome, and why.

Answer rating: 100% (QA)

ANSWER New Technology Cost of purchase 15000 Cost of maintenance 5... View the full answer