Should the company lease or buy the car

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Reference no: EM13847092

A company is deciding whether to lease or buy a car.

The lease would be for four years and requires a $7,500 payment. The company also has an initial cost of $2,500 for transporting the car. At the end of the lease, the van will return to the leasing company.

If they buy the car, it costs $31,000. This option will involve $2,250 annual payments for the car. They could sell the van for $10,000 at the end of the sixth year.

The cost of capital is 8%. Should the company lease or buy the car (use time value of money)?

Reference no: EM13847092

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