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.a. Trueb. False

Answer 1

Answer:

If the company is going to use the machine for 20 days, it is cheaper to lease it.

Explanation:

Giving the following information:

The cost to purchase is $10,000 plus $100 per day to operate or $500 per day to lease

First, we need to structure the total cost formula for each option:

Purchase= 10,000 + 100x

x= number of days

Lease= 500x

x= number of days

Now, we can determine the total cost for 20 days:

Purchase= 10,000 + 100*20= $12,000

Lease= 500*20= $10,000

If the company is going to use the machine for 20 days, it is cheaper to lease it.