You need to buy 20 computers for your business. You have the option of leasing the equipment for four years at $5,000 per year or buying the equipment at $1,000 per unit. Calculate the total cost for both options. What is the best option and why?
To calculate the total cost for both options, we need to consider the cost of leasing and the cost of buying.
For the leasing option:
The annual cost is $5,000 per computer, and you need 20 computers. Therefore, the cost for one year of leasing is 20 computers * $5,000 = $100,000. Since the leasing term is for four years, the total cost for leasing would be $100,000 * 4 = $400,000.
For the buying option:
The cost per computer is $1,000, and you need 20 computers. Therefore, the total cost for buying would be 20 computers * $1,000 = $20,000.
The best option depends on the total cost. In this case, the cost of buying the computers is significantly lower at $20,000 compared to leasing them, which would cost $400,000.
Therefore, buying the computers is the best option in terms of cost.
Before making a final decision, consider other factors such as your business's financial situation, expected lifespan of the computers, potential maintenance costs, and future needs.