Rocky Mountain Bus Tours needs an additional bus for three years. It can lease a bus for $2100 payable at the beginning of each month, or it can buy a similar bus for $120,000 using financing at the rate of 7.5% compounded monthly. The bus's resale value after three years is expected to be $60,000.
a) On strictly financial considerations, should the company lease or buy the bus?
b) What is the financial advantage in current dollars of the preferred choice?

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The Answer of Rocky Mountain Bus Tours needs an additional bus for three years. It can lease a bus for $2100 payable at the beginning of each month, or it can buy a similar bus for $120,000 using financing at the rate of 7.5% compounded monthly. The bus's resale value after three years is expected to be $60,000.
a) On strictly financial considerations, should the company lease or buy the bus?
b) What is the financial advantage in current dollars of the preferred choice?

Rocky Mountain Bus Tours Needs an Additional Bus for Three