Week 3
- Submitted by: cassi2121
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- Category: Politics: Economics
- Date Submitted: 01/22/2015 01:32 PM
- Pages: 2
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Lease versus Purchase Paper
FIN/370
Lease versus Purchase Paper
Many have struggled with understanding the benefits and negatives between leasing versus purchasing equipment. This is determined by the time value of money in which firms will make their financial decisions. These financial decisions are based on long term or short term investment projects. After further observations the firms can then make their financial decision of purchasing or leasing their equipment.
The decision to purchase or lease a home presents several factors to be considered. Lessors and buyers must weigh pros and cons to determine which direction is most beneficial for their financial positions. Homeowners are eligible to receive tax benefits from the interest earned on their homes, which ultimately lowers taxable income (irs.gov). Investing in a home today can secure future financial goals and obligations. Buyers reap benefits of the home appreciating over the years and building equity for future income and retirement. Although lessors or renters are not entitled to some of the same benefits as homeowners; however, they have the luxury of having a fixed monthly expenses. Their financial obligation is to pay the agreed monthly rent without any other extra costs. Tenants are not responsible for maintenance or upkeep, which both are associated with additional expenses. In some cases, tenants pay lower monthly payments than the actual mortgage payment
Time value of money is used to make financial decisions. It allows firms to project financial decisions based on their “maximization of economic welfare of shareholders” (Yulianto, Y. 2014). Depending on the company’s position and future investment will widely effect if the company will lease or purchase items.
Investment decisions focus on long-term or short-term investment projects. For example, some firms prefer to lease an office, because they are not the ones responsible to operate and maintain the building...
FIN/370
Lease versus Purchase Paper
Many have struggled with understanding the benefits and negatives between leasing versus purchasing equipment. This is determined by the time value of money in which firms will make their financial decisions. These financial decisions are based on long term or short term investment projects. After further observations the firms can then make their financial decision of purchasing or leasing their equipment.
The decision to purchase or lease a home presents several factors to be considered. Lessors and buyers must weigh pros and cons to determine which direction is most beneficial for their financial positions. Homeowners are eligible to receive tax benefits from the interest earned on their homes, which ultimately lowers taxable income (irs.gov). Investing in a home today can secure future financial goals and obligations. Buyers reap benefits of the home appreciating over the years and building equity for future income and retirement. Although lessors or renters are not entitled to some of the same benefits as homeowners; however, they have the luxury of having a fixed monthly expenses. Their financial obligation is to pay the agreed monthly rent without any other extra costs. Tenants are not responsible for maintenance or upkeep, which both are associated with additional expenses. In some cases, tenants pay lower monthly payments than the actual mortgage payment
Time value of money is used to make financial decisions. It allows firms to project financial decisions based on their “maximization of economic welfare of shareholders” (Yulianto, Y. 2014). Depending on the company’s position and future investment will widely effect if the company will lease or purchase items.
Investment decisions focus on long-term or short-term investment projects. For example, some firms prefer to lease an office, because they are not the ones responsible to operate and maintain the building...