your investments? Explain why.
c. Which option would you choose first if your objective was to maximize the net present value of
your investments per dollar spent? Explain why.
6. Consider the problem of whether or not to buy or lease a new piece of equipment. You know you
only need it for 5 years, and you can purchase it or lease it.
• The lease requires a down-payment of $2,000 upon signing the lease and then a monthly
payment of $560 due at the end of each month for the next 5 years. At the end of the lease the
equipment goes back to the dealer.
• If you purchase the equipment you buy it for $35,000 in cash, and at the end of the 5 years you
will sell the equipment for $5,000.
Assume the monthly interest rate is 0.5%. Calculate the present discounted value (cost) of your
options of leasing or buying this piece of equipment. Which option should you take?
