HP 12C manual Investment Analysis, Lease vs. Purchase

Investment Analysis

Lease vs. Purchase

An investment decision frequently encountered is the decision to lease or purchase capital equipment or buildings. Although a thorough evaluation of a complex acquisition usually requires the services of a qualified accountant, it is possible to simplify a number of the assumptions to produce a first approximation.

The following HP-12C program assumes that the purchase is financed with a loan and that the loan is made for the term of the lease. The tax advantages of interest paid, depreciation, and the investment credit which accrues from ownership are compared to the tax advantage of treating the lease payment as an expense. The resulting cash flows are discounted to the present at the firm's after-tax cost of capital.

KEYSTROKES		DISPLAY
CLEAR	00-
	01-		30
1	02-		1
0	03-44	40	0
3	04-	45	3
	05-		30
	06-		20
8	07-	44	8
1	08-		1
	09-	42	11
1	10-	44	1
	11-	45	13
9	12-	44	9
	13-	45	14
	14-44	48	0

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