You work for the local hospital and you and your colleagues need to decide on whether to purchase new equipment for the clinic. The acquisition cost is $50,000 if it is purchased. The depreciation of the equipment will be $10,000 for years 2 through 4. If the equipment is leased, it will cost $11,000 per year for 5 years.
- In regards to owning versus leasing, which method would you recommend and why?
- Explain using your understanding of capital budgeting and capital structure decisions.