You are the project manager on a construction project where you are deliberating between renting, leasing or purchasing a large piece of equipment.
- Rent at a cost of $2,500 per day.
- Lease for a 60 day period at $2,500 per day, with a 10% discount.
- Purchase at a price of $100,000.
By looking at your project schedule, you have estimated that you will use the equipment about 50 to 60 days. Based only on price, which decision would you recommend?
A. Purchase the equipment.
B. Lease the equipment.
C. Rent the equipment.
D. You do not have enough information to make a determination.
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The correct answer is A.
You can purchase the equipment for $100,000, whereas renting the equipment for 50 to 60 days would cost $125,000 to $150,000 or leasing the equipment for 60 days would cost $135,000.
Therefore, based only on price, the better choice is to purchase the equipment, answer A, rather than renting, answer C, or leasing, answer B.
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