Acquisition Decision
Response to the following problem:
Johnson Company is considering acquiring a new airplane. It has looked at two financing options. The first is to lease the airplane for 10 years with lease payments of $70,000 each year. The second is to purchase the airplane, making a down payment of $250,000 and annual payments of $40,000 for 10 years.
If the present value of the two financing options is the same, what other factors must be considered in deciding whether to purchase or to lease?