Question

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 =

Record the preset value factor at 10% for each year and compute the preset value cost of owning and the preset value of leasing. Which alternative is more desirable at this rate? do you think your answer would change if the interest rate was 6% instead of 10%

Answer 1

We can calculate the desired result in excel sheet as follows:

Formulas used in the excel sheet are as follows:

Net Present value cost of owning @ 10% = $ -39,273.03

Net Present value cost of leasing @ 10% = $ -34,401.39

Net Present value cost of owning @ 6% = $ -38,219.09

Net Present value cost of leasing @ 6% = $ -36,837.12

The NPV of Leasing comes out to be less that Cost of owning both at the rate of 10% and 6%. So, it is desirable to consider leasing as the option than to own.