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Unformatted text preview: of purchasing option. By analyzing both if we found that net advantage of leasing is positive we will prefer leasing over purchasing and if leasing net advantage is negative purchase option will be preferred. Therefore Caledonia should consider the net advantage of leasing and should compare the expenses and revenues associated with each option; For example under purchasing option firm can sell the equipment at the end of project and can receive cash inflow which will not be available in leasing option Yet at the same time under the purchase option Caledonia does not have to make the initial capital outlay. Another important factor to consider is that under purchase option operating expenses will be incurred while such expenses would not be incurred under the leasing option....
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- Winter '11