Question

if the company chooses the lease option, it will have to pay an immediate deposit of 25000 to cover any future damages to the equipment. deposit is refundable at the end of the lease term. the annual lease payments are made at the end of each year. based on a net present value analysis with a discount rate of 20% what is the financial advantage (disadvantage) of buying the equipment rather than leasing it

Answer 1

Answer:

The answer is "68,788".

Explanation:

Net cash flow present value = immediate deposit + Annual lease payment present value

$= 25000+(18000\times 2.991)-25000\times 0.402$

Net cash flow present value $= 78838-10050 = 68788$