Purchase new equipment for its dermatology unit

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Reference no: EM13890752

Harper Hospital is trying to decide whether to lease or purchase new equipment for its dermatology unit. The lease would require payments of $1,000 at the beginning of each month for five years. The hospital would also have to pay a delivery fee of $5,000 at the start of the lease, and an additional $2,500 pick-up fee at the end of the lease. (Hint: assume monthly compounding of the pick-up fee.) By contrast, the purchase price is $55,000; however, the hospital was able to work out a payment plan with the vendor. Instead of paying the full cost upfront, the hospital would make a $25,000 payment upfront and would then pay the remaining balance in equal monthly installments over the next six months. Payments would be due at the end of each month. If purchased, the equipment would have a useful life of five years and no salvage value. The hospital uses a discount rate of 5.5%. From a financial perspective, should the hospital lease or purchase the equipment for the dermatology unit?

Reference no: EM13890752

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