Can someone please show me how to do this step by step? From my numbers, I got (
ID: 2720436 • Letter: C
Question
Can someone please show me how to do this step by step? From my numbers, I got ($12,969) and ($376,761) for leasing and owning, respectively.
You are currently leasing the space for your clinic at $2000 per month. The owner of the building wants you to either sign a 8-year lease or sell you the building. The current owner includes basic maintenance worth $500 per month in the lease. Though, if you buy, you will have to pay for the maintenance. Your practice covers everything else involved, regardless of whether you lease or buy. Your practice is a non-profit organization. The area around the clinic has undergone considerable change as old apartment buildings have been rehabbed and converted to condos. Depreciation of your clinic is equal to $6000. Salvage value is assumed to be $250,000. Loan rate is 6.5%
a.What is the cost of leasing?
b. Assuming a purchase price of $300,000 what is the cost of owning?
Explanation / Answer
(a) Cost Of Leasing Amount($) Cost of Leasing = Lease Rent X No. of Year 2000*(12*8) 192000 (b) Cost Of Leasing Amount($) Year Principle Interest@6.5% Annual Cost Salavage value Total Cost PV@6.5% Present Value 1 37500 19500 6000 0 63000 0.938967136 59154.92958 2 37500 17063 6000 0 60562.5 0.881659283 53395.49031 3 37500 14625 6000 0 58125 0.827849092 48118.72846 4 37500 12188 6000 0 55687.5 0.777323091 43287.17962 5 37500 9750 6000 0 53250 0.729880837 38866.15454 6 37500 7313 6000 0 50812.5 0.685334119 34823.53991 7 37500 4875 6000 0 48375 0.643506215 31129.61314 8 37500 2438 6000 0 45937.5 0.604231188 27756.87018 8 0 0 0 250000 0 0.604231188 151057.7969 Total Cost 185474.7088