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In: Finance

Company Ginko’s can either buy or lease a printer. If thecompany chooses to buy, the...

Company Ginko’s can either buy or lease a printer. If the company chooses to buy, the printer costs $250 upfront with varying annual maintenance cost as shown below. The printer will last 3 years. Alternatively, the company can sign a 5-year lease to rent a printer for an annual cost of $180. The company’s cost of capital is 10%.

(i) What is the EAC (equivalent annual cost) for buying a printer? (ii) Which option (buy or lease) is better? Show your analysis.

Year

0

1

2

3

4

5

Buying a Printer

-250

-60

-70

-80



Leasing a Printer


-180

-180

-180

-180

-180

Solutions

Expert Solution

i)

ii)

EAC of leasing will be -$180 which is higher than EAC of Buying.

jeff jeffy answered 2 years ago
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