Reference no: EM132385798
Question
A start-up venture in its first year of business needs a $120,000 piece of equipment. Because of changes in technologies it has a maximum service life of 3 years and zero residual value. They have 3 options:
1. Buy the equipment for cash.
What are the pros and cons of the option
What is the effect on the income, balance sheet and cash flow statements
2. Rent the equipment for one year month to month at $8,500 per month
What are the pros and cons of the option
What is the effect on the income, balance sheet and cash flow statements
3. Sign a 3 year lease agreement for 7743 a month for 36 months
What are the pros and cons of the option
What is the effect on the income, balance sheet and cash flow statements
Which of the 3 would you recommend, and why?
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