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Corporate Buy vs. Lease Analysis

Corporate Buy vs. Lease Analysis. A Presentation by Team Four: Junni Kim Trung Nguy Robert Quesada II Felipe Vargas Yiu-Ming Yuen February 10, 2004. Our Scenario. The Client: 3D graphics design company The Consultant: Engineering consulting company needs to replace 25 PC’s for its client

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Corporate Buy vs. Lease Analysis

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  1. Corporate Buy vs. Lease Analysis A Presentation by Team Four: Junni Kim Trung Nguy Robert Quesada II Felipe Vargas Yiu-Ming Yuen February 10, 2004

  2. Our Scenario • The Client: 3D graphics design company • The Consultant: Engineering consulting company needs to replace 25 PC’s for its client • Consultant considers buying or leasing the workstation equipment • 3D graphics application recommends P4, 2.5GHz processor, 1GB SDRAM, 120GB HD, 256MB video ram, and DVD-RW capability

  3. Resources • www.dell.com for workstation equipment • Class textbook: “Essentials of Engineering Economic Analysis”, 2nd ed. • Search engines to find reputable internet consulting firms for more examples and ideas of methodology

  4. Equipment Chosen • Dell Precision Dimension 8300 • P-4 at 3.2GHz • 1GB SDRAM • 120GB HD • 256MB video ram • DVD-RW • Total Cost of equipment: $2,282/PC x 25 PC’s = $37,425

  5. Our Options to Acquire this Equipment • Fair Market Value Lease • 10% Purchase Option Lease • $1 Buy-Out Purchase Plan Lease • Finance Purchase

  6. Cost of Each Option

  7. Benefits of Leasing • Smaller Capital Expenditure • Protection Against Obsolesce • Flexibility • Tax Advantages • Improved Balance Sheet

  8. Costs of Leasing • Finance Charges • No resale value realized • Technology upgrade options are expensive

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