Equipment leasing and equipment financing.

Read the article cited below that summarizes equipment leasing and equipment financing. (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