Analyzing Lease vs. Buy Decision

1620 WordsSep 8, 20067 Pages
Analyzing Lease vs. Buy Dec To buy or not to buy is the question for many companies acquiring assets for their business. Equipment and other assets are extremely important when a company is trying to get off the ground in a new business. The chief executive officer would have to ask how would we finance the equipment needed, pay back investors, and make the company profitable for all. This new biotech company is seeking financial remedies in becoming a profitable company. Bonnesante` Research Company has 30 employees and located in Irvine, California. They operate on venture capital funding now, which are investors that are offered a stake in a company that has risk of failing or being very profitable. Acquisitions…show more content…
In 2xx4, Bonnesante` needs to acquire an advance spectrometer to achieve key breakthroughs in the research and development department. Their options are a short-term operating lease, capital lease that is for a longer duration and a loan to buy the spectrometer outright. They would need to evaluate the duration they would need the equipment, the present value of financing, and the impact on the balance sheet. The available options are at the interest rate of 6 %: Operating Lease Buy Capital Lease Terms (months) 36 Terms (months) 40 Terms (months) 42 Down Payment 92,025 Down Payment 113,608 Down Payment 82,827 Security Deposit 124.03 Maintenance ($000) 160.00 Security Deposit 110.42 Monthly Payments 62.02 Monthly Payments 56.80 Monthly Payments 55.22 Comparison Table Present Value ($000) Operational Lease 1,781 Capital Lease 1,835 Buy 2,224 Samuel Malone the chief executive officer feels that the equipment is crucial to their research and development department and be a good long-term investment. He would prefer a capital lease to an operational lease. Nicholas Tortelli

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