Assignment 2: Making a Lease or Purchase Decision

It is coming to the end of the fiscal year and you have to decide whether to continue to lease the PCs in the company or buy new ones.

The current lease agreement is for $20/per month per machine with a 5% annual escalation. There are currently 120 machines being leased and it is planned that a total of 150 will be needed in the next year, and that 25 machines will be added for the following years.

You have negotiated a price of $735 per machine to buy new machines with an expected replacement after 3 years of use. The price is locked in for 2 years and will rise by 5% in the third year.

Develop a spreadsheet showing the cost for each of the two options, lease or buy, using a 3 -year time span.

Write a one-page memo to the CIO recommending one of the options, using price and other factors. Attach the spreadsheet to the memo.