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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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  • Category:- Physics
  • Reference No.:- M9401839

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