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A firm is considering either leasing or buying a microcomputer system. If purchased, the initial cost will be $250, 000: annual operating and maintenance cost will be $80, 000 per year. Based on a 6-year planning horizon, it is anticipated the computer will have a salvage value of $30, 000 at that time. If the computer is leased, the firm will owe $50, 000 at the beginning of the year. In addition, annual operating and maintenance costs in excess of the annual lease payment wilt be $60, 000 per year. You are to draw the cash flow diagrams for the buy option and one for the lease option. Please state any assumptions (if any) clearly.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92642062

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