Read the article cited below that summarizes equipment leasing and equipment financing.
https://www.inc.com/jared-hecht/equipment-leasing-vs-equipment-financing-what-you-need-to-know.html (Links
to an external site.)
Using this information and an analysis of the information below, provide a recommendation to the President of
the JW Company (an upscale, pre-made, dinner time food packages) on whether the equipment they need
should be purchased with a loan or leased.
Data for the Decision
Equipment Cost = $120,000
Estimated annual Maintenance cost = $2200
Annual Cost savings from the new equipment = $4400
Purchase information:
Loan rate from the bank = 9.0%
Annual Maintenance Cost to be paid by the company
Lease information:
Five-year annual lease Payment = $25,500
Option to purchase equipment after 5 years at $40,000
Annual Maintenance Cost would be done by the lease and is covered with the lease payment
Sample Solution
