Which is cheaper for the company to buy or lease real, Ask an Expert

Management Studies

Q. Consider this scenario.

A company has the following alternatives on some real estate that it needs for its new plant. It can lease the facility for $10,000 a month for 15 years or it can buy the facility now for $800,000. The company’s weighted average cost of capital is 12% and payments are made at the end of each month.

Based on this information, answer the following:

Which is cheaper for the company: to buy or lease real estate? Show your computations.

Illustrate what non-quantitative factors should the management consider when making the decision?

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Business Management, Management Studies

Category:- Business Management
Reference No.:- M9373831

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