Question: The company you work for is considering acquiring several of the latest generation desktop computers for use in an office. The company expects the equipment to have a useful life of three years. The finance director has asked you to recommend whether the equipment should be purchased outright or whether it should be leased from the supplier. If the equipment is purchased outright the total cost will be £4200. At the end of the three years it is estimated that the equipment will have a scrap value of £500. If the machine is leased then the rental charge will be £1660 per annum payable at the start of each year. The company's cost of capital is currently 10.5 per cent per annum.
Draft a report advising the company whether it should purchase or lease the equipment and comment on any other factors the company may want to consider before making a decision.