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A small real estate office needs a new copier. They have their choice between leasing a new copier for $2,000 per year with all maintenance included or they can purchase their own copier for $4, 200 and would incur $1, 200 per year in operating costs. Paper and cartridge costs for the copier would be identical in either case.

The lease would be for a total of 6 years and the copier, if bought, would have a useful life of 6 years and no expected salvage value at the end of that time.

Determine if owning the machine would be cheaper on a per-year basis than leasing the machine. Then firm's tax rate is 34% and the proper required rate of return for the project would be 7%.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92823087

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