Computer Rental VS Outright Purchase

[Flupsie]

I would like to set up a spreadsheet to determine which is most beneficial-to purchase computers and printers value $ 80,000 or to rent/lease these over a 3 year period.The interest rate is 9% in year 1 with a 2% escalation per annum thereafter

The computers and printers that are purchased for cash can be written off tax purposes immediately in the year of purchase-The downside is that there is a cash outflow of $80000. The tax rate is 28%

It would be appreciated if someone could assist me in determining which is most beneficial.

 

[kirby]

How about sales tax rate?
After lease period ends, is there a renewal option - how much for how long?
Come on , man, let' s put some effort into this!

 

[Flupsie]

Computer Purchase Vs Rental

Further to my earlier post I have set up a template to compate the cost of Renting computer equipment VS Outright purchase.

It would be appreciated if someone can check my spreadsheet and advise if my assumptions are correct. If not please make the necessary changes and advise.

Your assistance will be most appreciated

 

[Flupsie]

How about sales tax rate?
After lease period ends, is there a renewal option - how much for how long?
Come on , man, let' s put some effort into this!

The Sales tax rate is 14%, after the lease ends, there is no renewal option

 

[Flupsie]

Hi Guys

Attached please find amended schedule Rental VS outright purchase

Please check and make any amendments

Your assistance will be most appreciated

 

[ArcSine]

Couple of tweaks you might need to make...

First check your after-VAT monthly payment for the 3rd year.

Second, it appears you're trying to determine the PV of the lease payments by discounting the payments at the same rate which is used to determine the monthly lease payment itself, each year.

If that's the case, you'll need to calculate the PV of the lease payments (i.e., do the 'discounting') differently.

Each of the 36 payments should have a different discount rate. Using the 2nd-year payments to illustrate, remember that the first payment in the second year occurs 13 periods (monthly) after today, the 2nd payment in the second year occurs 14 periods after today, etc.

Thus the 13th lease payment (the first of the second year) is discounted by (1 + 0.11 / 12)^13. The 14th payment is discounted by (1 + 0.11 / 12)^14, and so on.

Also keep in mind that the lease payments are typically deductible when paid.

 

[Flupsie]

Thanks for your reply & input, which is much appreciated

I will be making some changes based on your input. I googles to see whether I could get some form of template, but could not find anything so I just created my own based on various assumptions

Although I majored in Financial Management many years ago, I have never done done a practical excercise to determine which is the best ruote to follow i.e to purchase computer equipment for cash or to rent these over a 3 year period

I used the interest rate to determine discount rate just to set up the template, but would need to calculate the cost of capital to determine what discount rate I need to use