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You are considering either buying a computer or leasing one $725 per year (paid at the beginning of the year) for 3 years.

You are considering either buying a computer or leasing one $725 per year (paid at the beginning of the year) for 3 years. The current value of the computer is $2,000. You don’t have that much cash but you can get a loan for 8%. Which would cost less, buying or leasing? (Must show a solution to receive full credit.)

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Expert Solution

Present Value of leasing=Present Value of Annuity due=Annuity/r*(1-1/(1+r)^n)*(1+r)=725/8%*(1-1/1.08^3)*1.08=2017.8669

Buying would cost less

jeff jeffy answered 2 years ago
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