Question

Assignment Exercise 23–1: Cost of Owning and Cost of Leasing Cost of owning and cost of leasing tables are reproduced below.

Required Using the appropriate table from the Chapter 13 Time Value of Money Appendices appearing as 13-A, 13-B, and 13-C, record the present-value factor at 10% for each year and compute the present-value cost of owning and the present value of leasing. Which alternative is more desirable at this interest rate? Do you think your answer would change if the interest rate was 6% instead of 10%?

Cost of Owning—Anywhere Clinic—Comparative Present Value
For-Profit Cost of Owning:	Year 0	Year 1	Year 2	Year 3	Year 4	Year 5
Net Cash Flow	(48,750)	2,500	2,500	2,500	2,500	5,000
Present value factor
Present value answers =
Present value cost of owning =

Cost of Leasing—Anywhere Clinic—Comparative Present Value
For-Profit Cost of Leasing:	Year 0	Year 1	Year 2	Year 3	Year 4	Year 5
Net Cash Flow	(8,250)	(8,250)	(8,250)	(8,250)	(8,250)	—
Present value factor						—
Present value answers =
Present value cost of leasing =

Answer 1