You have two options to obtain communications equipment for your business. The first option is to...
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You have two options to obtain communications equipment for your business. The first option is to lease the equipment for five payments of $2,000 per year, with the first payment due today. At the end of the fifth year you will return the equipment and will need to decide how to replace it. The second choice is to purchase the equipment for $8.500 today. You expect the purchased equipment to have a useful life of five years, after which it will be obsolete, have no resalo value, and you will need to decide how to replace it. Which option offers the best value for your business if your discount rate is 10% LOI and L03 The leasing option has the highest future value and therefore, offers your business the best value The leasing option has the lowest present value and therefore, offers your business the best value O The purchase option has the lowest present volue ond, therefore, offers your business the best value The purchase option has the highest future value and therefore, often your business the best value You have two options to obtain communications equipment for your business. The first option is to lease the equipment for five payments of $2,000 per year, with the first payment due today. At the end of the fifth year you will return the equipment and will need to decide how to replace it. The second choice is to purchase the equipment for $8.500 today. You expect the purchased equipment to have a useful life of five years, after which it will be obsolete, have no resalo value, and you will need to decide how to replace it. Which option offers the best value for your business if your discount rate is 10% LOI and L03 The leasing option has the highest future value and therefore, offers your business the best value The leasing option has the lowest present value and therefore, offers your business the best value O The purchase option has the lowest present volue ond, therefore, offers your business the best value The purchase option has the highest future value and therefore, often your business the best value
Expert Answer:
Answer rating: 100% (QA)
To determine which option provides the best value we need to compare the present value of cash flows ... View the full answer
Related Book For
Intermediate Accounting
ISBN: 978-0470161012
9th Canadian Edition, Volume 2
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield.
Posted Date:
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