Corporate Buy vs. Lease Analysis

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 PCs 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 PCs
  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