32.) Heidi Inc. is considering whether to lease or purchase a piece of equipment
ID: 2478180 • Letter: 3
Question
32.)
Heidi Inc. is considering whether to lease or purchase a piece of equipment. The total cost to lease the equipment will be $138,000 over its estimated life, while the total cost to buy the equipment will be $84,000 over its estimated life. At Heidi’s required rate of return, the net present value of the cost of leasing the equipment is $77,000 and the net present value of the cost of buying the equipment is $71,000. Based on financial factors, Heidi should
lease the equipment, saving $6,000 over buying.
lease the equipment, saving $54,000 over buying.
buy the equipment, saving $54,000 over leasing.
buy the equipment, saving $6,000 over leasing.
33.)
You will need at least $5,300 in four years and your friend says she can either loan you $5,300 all at once four years from now or she can deposit $1,325 in your savings account at the end of each year for the next four years. Your savings account earns 10% interest, compounded annually. Which option would be worth more to you four years from now, and how much more? (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Round your FV factor to 4 decimal places and final answer to the nearest dollar amount.)
The annual deposits will be worth $849 more than the $5,300 in four years.
The $5,300 in four years will be worth $657 more than the annual deposits.
The $5,300 in four years will be worth $849 more than the annual deposits.
The annual deposits will be worth $657 more than the $5,300 in four years.
Heidi Inc. is considering whether to lease or purchase a piece of equipment. The total cost to lease the equipment will be $138,000 over its estimated life, while the total cost to buy the equipment will be $84,000 over its estimated life. At Heidi’s required rate of return, the net present value of the cost of leasing the equipment is $77,000 and the net present value of the cost of buying the equipment is $71,000. Based on financial factors, Heidi should
Explanation / Answer
Answer 32
buy the equipment, saving $6,000 over leasing.
Answer 33
Value in saving account after 4 years =(1325*(((1+0.1)^4)-1))/0.1
= 6149.33
The annual deposits will be worth $849 more than the $5,300 in four years.
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