Suppose your company is trying to decide whether it should buy special equipment to prepare some of its high-quality publications itself or lease the equipment from another company. Suppose leasing the equipment costs $240 per day. If you decide to purchase the equipment, the initial investment is $6,800 and operations will cost $70 per day. After how many days will the lease cost be the same as the purchase cost for the equipment? Assume your company would only use this equipment for 30 days. Should you company buy the equipment or lease it?
Answer:
For Leasing:
Equipment cost/day = $240
Duration of lease = 30 days
So, total cost for leasing equipment = $240 * 30
= $7,200
For Purchase:
Initial Investment = $6,800
Operations cost per day = $70
So, total cost for the purchase = $6,800 + $70 *$30
= $8,900
To calculate number of days after which the lease cost is the same as the purchase cost for the equipment is as follows:
Number of days = Total cost of purchase / per day cost for lease
= $8,900 / $240
= 37.08 days.
From the above calculation we can say that approximately after 37.08 days the lease cost will be the same as the purchase cost for the equipment.
Equipment cost/day = $240
Duration of lease = 30 days
So, total cost for leasing equipment = $240 * 30
= $7,200
For Purchase:
Initial Investment = $6,800
Operations cost per day = $70
So, total cost for the purchase = $6,800 + $70 *$30
= $8,900
To calculate number of days after which the lease cost is the same as the purchase cost for the equipment is as follows:
Number of days = Total cost of purchase / per day cost for lease
= $8,900 / $240
= 37.08 days.
From the above calculation we can say that approximately after 37.08 days the lease cost will be the same as the purchase cost for the equipment.
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