Analyzing Lease Vs Buy Decisions

Paper Summary:

This paper takes a look at the issue of buying or leasing company assets. The paper studies the company, Bonnesante Research, discussing both the option to lease and to buy certain assets for the company's use in its operations. The primary objective of this simulation is to determine which among the two options would be applicable and be effective in the given circumstances.

From the Paper:

"In the simulation scenario, the initial requirement being considered by Bonnesante is the acquisition of a mainframe computer. This computer equipment would be useful for the company's objective to heighten its research for the first six months of its trial operations and support the requirement of the Food and Drug Administration. To acquire the equipment, Bonnesante must determine whether to purchase the computer mainframe outright or use the mainframe under an operating lease agreement. Based on the decisions made in the simulation, the company opted to lease the mainframe for 18 months. The decision to lease was employed in consideration of the rapid obsolesce of computer equipments and comparatively to advance high-end computer workstations which is functioning at par with mainframes. Purchasing it was not advisable. Since Bonnesante is still not a profitable company, the depreciation of such equipments shall affect the present cash flow situation due to the un-applicability of taxes if the mainframe is to be purchased. Operating lease is a good option for equipments with high rates of obsolesces."

Sample of Sources Used:

• FINANCIAL ANALYSIS FOR MANAGERS II FIN/325, ASSESSMENTS,SIMULATIONS: "Analyzing LeaseVs. Buy Decisions." Extracted May,30, 2006: Website https://mycampus.phoenix.edu/login.asp
• Buy Versus Lease: What You Need to Know, J.Schiff (July,2005) Extracted June 01, 2006; Website: http://www.smallbusinesscomputing.com/testdrive/article.php/3523561
• Buy Or Lease?, Wilson, Dan (2005) Croplife (2005) Copyright Meister Media Worldwide (Nov 2005) Extracted May 31, 2006; Website; http://www.findarticles.com/p/articles/mi_qa4003/is_200511/ai_n15746124
• WHAT IS CAPITAL BUDGETING?, Extracted June 01, 2006 Website: www.exinfm.com/training/capitalbudgeting.doc

More papers on Analyzing Lease Vs Buy Decisions:

• Case Study # 96162 : "To Buy or Lease?"
• Essay # 69756 : "Lease or Buy?"

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