Solved: Option to purchase equipment, Finance Basics

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Option to purchase equipment

Problem: Company has the option to purchase equipment for $24,000, but can lease the same equipment for $5,000 per month for the next 6 years. Its WACC is 7.656% and has an equipment salvage of $1,000 at the end of 6 years. Which option should the company take?

a. Lease

b. Buy

c. Indifference

d. Not enough information to answer; cash flow from equipment is needed.

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Finance Basics: Option to purchase equipment

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