otse Automotive is planning to expand its operation by planning to add a machine costing $90.000. The company is facing two possible options which are: Option 1- Lease arrangement which will require the company to pay $15.000 for 5 years and an option to purchase at $20,000 at the end of the lease Option 2 - Purchase the machine thru debt financing which would require the company to pay $20,000 for 5 years. The company is expected to spend $1,000 every year for 5 years for the machines repairs and maintenance. Which of the two options should the company choose it costs of debt is at 9%?
otse Automotive is planning to expand its operation by planning to add a machine costing $90.000. The company is facing two possible options which are: Option 1- Lease arrangement which will require the company to pay $15.000 for 5 years and an option to purchase at $20,000 at the end of the lease Option 2 - Purchase the machine thru debt financing which would require the company to pay $20,000 for 5 years. The company is expected to spend $1,000 every year for 5 years for the machines repairs and maintenance. Which of the two options should the company choose it costs of debt is at 9%?
Chapter19: Lease And Intermediate-term Financing
Section: Chapter Questions
Problem 6P
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Kotse Automotive is planning to expand its operation by planning to add a machine costing $90.000. The company is facing two possible options which are:
Option 1- Lease arrangement which will require the company to pay $15.000 for 5 years and an option to purchase at $20,000 at the end of the lease
Option 2 - Purchase the machine thru debt financing which would require the company to pay $20,000 for 5 years. The company is expected to spend $1,000 every year for 5 years for the machines repairs and
maintenance.
Which of the two options should the company choose it costs of debt is at 9%?
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