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I wish to purchase a bulldozer. Should I lease? I could pay 300000 today cash or...

I wish to purchase a bulldozer. Should I lease? I could pay 300000 today cash or I could lease the equipment for 5 years at 5000 per month. If I lease the bulldozer a down payment of 30000 is required. If I purchase for cash the equipment will have a salvage value of 50000 at the end of 5 years. The cutrent market interest rate if 5%. Calculate the present value of each alternative.
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Answer #1

Solution:

Computation of Present Value of Purchasing and Leasing option
Particulars Period Amount PV Factor (0.416666% per montb) Present Value
Purchasing Option:
Purchase price of Bulldozer 0 -$300,000.00 1 -$300,000
Sale Value of Bulldozer 60 $50,000.00 0.77921 $38,960
Present Value of Buying Option (A) -$261,040
Leasing Option:
Annual lease payment 1-60 -$5,000.00 52.99071 -$264,954
Down payment 0 -$30,000.00 1 -$30,000
Present Value of Leasing Option (B) -$294,954
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