A firm can lease office furniture for 5 years (its useful life) for $20,000 a year, or it can purchase the furniture for $80,000. Which is a better choice if the firm can invest its money at 10% per annum?
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PV of the lease payments (assumed made at the beginning of the period):
= (20,000) + (20k)/1.10 + (20k)/1.10^2 + (20k)/1.10^3 + (20k)/1.10^4
= (83,397.31)
Not accounting for the tax benefit (tax shelter) of depreciation, it's better to buy the furniture, because it costs $80k vs. the lease which will cost $83,397.31.
= (20,000) + (20k)/1.10 + (20k)/1.10^2 + (20k)/1.10^3 + (20k)/1.10^4
= (83,397.31)
Not accounting for the tax benefit (tax shelter) of depreciation, it's better to buy the furniture, because it costs $80k vs. the lease which will cost $83,397.31.
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Household equipment designed for a variety of purposes. It may be made of wood, metal, plastics, marble, glass, fabrics, and related materials. It ranges from the simple pine chest or country chair to the elaborate marquetry-work cabinet or gilded console table. It is usually movable, though it can be built-in, as are kitchen cabinets and bookcases. It can either reveal or hide how it was constructed, and it can be highly stylized. The design and building of furniture is related to both architecture and interior design. Throughout history the functional and decorative aspects of furniture have been influenced by economics and fashion. bentwood furniture; Early American furniture; Shaker furniture. particular categories of furniture: e.g., bed; chair; table.