Multiple choice A firm can lease office furniture for 5 year

Multiple choice: A firm can lease office furniture for 5 years for $20,000 per year, or it can purchase the furniture for $80,000 outright. Which is a better choice if the firm can invest its money at 10% annual interest rate? (Assume the furniture will have no remaining value at the end of the 5 years.)

a. The company would need $62,092 to lease the furniture; they should lease.

b. The company would need $71,632 to lease the furniture; they should lease.

c. The company would need $75,816 to lease the furniture; they should lease.

d. The company would need $100,000 to lease the furniture; they should buy.

Solution

If the company buys the furniture the cost is $ 80000 but the lease amount is $20000 for one year so for 5 years it is $100000 so better the company buys the furniture .the option is (d)