A freelance electrician can purchase an equipment for $ 320,000 and use for 10 years, when its
salvage value is $50,000.
Alternatively, it can be leased for $40,000 a year. The lease payments occur every year with an
interest rate of 7%.
a. What is the interest rate for purchasing versus leasing? Which is better?
b. $65,000 each year will be spent on maintenance
that is currently spent on the purchasing power. Should he obtain the equipment ? What
is the rate of return for the equipment
using the best financing plan?