Considering either leasing or buying microcomputer system

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Reference no: EM131087669

A firm is considering either leasing or buying a microcomputer system. If purchased, the initial cost will be $250,000; annual operating and maintenance costs will be $80,000/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, annual operating and maintenance costs in excess of the annual lease payment will be $60,000/year. Based on an interest rate of 10%, what annual beginning-of-year lease payment will make the firm be indifferent between leasing and buying? a. Use the present worth method. b. Use the internal rate of return method.

Reference no: EM131087669

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