Unformatted text preview: y similar to the
existing two pieces of equipment. There are several pieces of equipment readily available in the
market at an annual fixed rate lease cost of $230,000 which would include all maintenance
services. Insurance is included in the $230,000 lease cost. Peer Ltd. does not have the financial
capacity nor interest in purchasing additional equipment.
When Peer Ltd. began operations in 2002 leases were not an option. Now Peer management wonders if
it should consider leases as an option, what would be the optimal course of action for Peer Ltd.for 2011?
Provide rationale in support of your plan of action.
Lease Hours:: Lease 1 NEW Lease Hours:: Balance of hours needed from old machine Total Hours Used 8500 9500 18000 Insurance saved Status Quo Variable Cost Lease costs ( 1 ,2 or 3) Total Cost 348,171 230,000 578,171 Lease 8500 17,000 12000 1,000 20500 18,000 439,795...
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- Winter '08