A company is considering whether to purchase or lease a piece of equipment for an upcoming project. The cost to purchase is $10,000 plus $100 per day to operate or $500 per day to lease (including operating costs). If the company anticipates using the equipment for a total of 20 days, they will be indifferent as to whether or lease or purchase it.

Question

A company is considering whether to purchase or lease a piece of equipment for an upcoming project.  The cost to purchase is $10,000 plus $100 per day to operate or $500 per day to lease (including operating costs). If the company anticipates using the equipment for a total of 20 days, they will be indifferent as to whether or lease or purchase it.

Quizplus · Accepted Answer

If the company uses the equipment for 20 days, they would be better off with a lease at a total cost of $10,000 (20 x $500).  The purchase cost of $10,000 will be increased by $2,000 of operating costs (20 x $100).

A Company Is Considering Whether to Purchase or Lease a Piece