What non-quantitative factors should the management consider when making the decision to buy facility for $800,000 or lease for 10,000 a month
When making the decision to buy a facility for $800,000 or lease it for $10,000 a month, the management should consider various non-quantitative factors. These factors may include:
1. Flexibility: Leasing provides more flexibility compared to committing to a purchase. If the company's needs change in the future or they want to relocate, leasing allows for easier adjustments.
2. Maintenance and repairs: Owning a facility means taking responsibility for maintenance and repairs, while leasing often shifts this responsibility to the landlord. The management should consider whether they have the resources and expertise to handle maintenance issues in-house.
3. Long-term plans: Consider the company's long-term plans and growth projections. If the company anticipates significant growth or changes in the near future, leasing might make more sense, as it allows for easier scalability.
4. Capital investment: Purchasing a facility involves a significant upfront capital investment. On the other hand, leasing requires less initial expense, which can be advantageous for companies with limited capital or those wanting to allocate funds to other areas of their business.
5. Market conditions: Evaluate the current real estate market conditions, such as property prices, interest rates, and rental rates. This can help determine if it is a good time to buy or lease and avoid potential financial risk associated with fluctuations in the market.
6. Tax implications: Consider the tax implications associated with buying or leasing. For example, owning a facility may offer tax benefits like depreciation deductions, while leasing expenses are typically fully deductible.
To make a well-informed decision, the management should weigh these non-quantitative factors alongside the quantitative factors like the company's financial position, cash flow projections, and potential return on investment. Consulting with relevant professionals, such as real estate advisors or accountants, can also provide valuable insights during the decision-making process.