A hospital needs an Endoscopy Equipment. It can buy or lease the equipment
Alternative 1. The machine costs $180,000. Installation costs are $45,000.
The machine will be used for four years. Every year, there is a fixed annual cost of $100,000.
It is estimated that there will be 5000 procedures per year.
Each procedure costs $40 and brings in a revenue of $80
At the end of four years, there is a salvage value of $110,000.
Alternative 2 Lease the equipment
Lease cost per year $60,000
Revenues and Costs every year as before
Assume 4 years planning horizon. Should they buy or lease the machine??
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