ANALYSIS FOR PCs

Lease-Versus-Purchase Analysis for PCs



Lease-Versus-Purchase Analysis for PCs

In the first scenario, the company needed to have an accessible computer urgently to run their Operating system Administration department. This would allow them to have access to their first drug inventory. Therefore my job was to decide the best option with little timing for the company, which was should they lease or buy this equipment.

The simulation in lease versus buy option is set up to enhance our knowledge in the decision-making aspects of evaluating the lease versus buy options. The company will show decision-making options for leasing or buying a computer. Also, deciding on how to acquire the spectrometer. In addition, the company has plans to upgrade their manufacturing capacity. Throughout all the decision making process we should be able to analyze the lease versus buy option with the given details and become more knowledgeable of the process and the options that are best for the company.

With little timing, I felt the best choice for to make would be to lease a mainframe computer, which has all the necessary tools they need to utilize in such short time.

Also, leasing equipment has a lower cash flow option and I was able to select a 30-month lease with no down payment. This will "help preserve capital budget for other expenditures" (Roch, W., 2005, p. 1).

In the second scenario, the company has to decide on whether they should purchase the spectrometer for R & D through operating lease, capital lease, or buying. I opted for buying the spectrometer because this would allow for more opportunities in the future. This spectrometer could be used for the duration of the company. There are some circumstances where purchasing out weighs leasing and this is one of the situations that it was more feasible to do so.

In the third scenario, the company has decided in the six years of service that they want to make a manufacturing department for their company. Now, the decision that needs to be made is should they lease or buy this building in the event that some upgrading may need to be done. After a careful review of the options, I decided that this company would fair better by doing a capital lease for this manufacturing company. Once I reviewed the capital lease value versus the buying price of the plant, I felt it would be a better direction for the company to go in due to the upgrading that stills needs to be done to the building. They could always negotiate that in their contract. In addition, the annual payment for capital lease was a better benefit for the company.

The lease versus buy decision is based on a comparison between the net present value of the buy alternative with the net present value of the cash flows associated with leasing. In the model below, explicit financing costs are excluded, because capital decisions are not necessarily made in isolation of one another, and the purchase is assumed to be an outright ...