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Your boss has given you the responsibility for furnishing the soon-to-be-completed headquarters building. The furniture you have picked out at Cape Furniture Company can be purchased for $125,000 and then sold at the end of its 10 year useful life for $10,000. Cape has also given you the option of leasing the furniture for $18,000 per year for 10 years. Your first payment will be made when you sign the lease and receive the furniture. Under the lease agreement, you will have to return the furniture to Cape at the end of ten years (with no compensation). Assuming the annual interest rate of 9%, which option (buying or leasing) is better and by how much?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M9450292

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