Lease versus purchase | Business & Finance homework help

Scenario

Health resources are finite. Therefore, it is incumbent on all health organizations to exercise responsible fiscal decision making when allocating their financial resources.

As the senior cost analyst for a local, nonprofit hospital, you are charged with determining the most appropriate use of financial resources and making recommendations. Your organization is seeking to secure a new CT Scan unit for the expanded emergency department. The hospital has the option of leasing the equipment or purchasing the equipment.

The cost to purchase the CT scan is $1,300,000 at 10% (PV), with straight line depreciation over 5 years. The trade-in value $130,000 at the end of its useful life. The maintenance expense equals $12,000 annually.

The cost to lease the equipment is $26,000 per month for a period of 60 months, which includes all maintenance costs. The tables below provide the financial overview of the purchase and lease costs.

Purchase

Purchase table

Lease

Lease table

Instructions

In a written case analysis, use the figures provided in the tables to discuss the following:

  • Compare and contrast leasing versus purchasing. You may use the Rasmussen library to research articles addressing lease versus purchase decisions in order to support your assertions.
  • Calculate the figures relative to the principal payment, interest payment, maintenance expense, total expense, and PV expense and complete the tables linked here  .
  • Provide a detailed explanation of the costs associated with leasing the equipment as depicted in the table.
  • Provide a detailed explanation of the costs associated with purchasing the equipment as depicted in the table.
  • Discuss the potential tax implications of leasing the equipment, assuming that the organization is a nonprofit.
  • Discuss the potential tax implications of purchasing the equipment, assuming that the organization is a nonprofit.
  • Recommend a course of action and the implications that your recommendation may have for the organization.

Rubric:

  • Criterion 1
    0% of total gradeA – 4 – MasteryClear and thorough discussion comparing and contrasting leasing versus purchasing. Includes multiple examples to support assertions.0B – 3 – ProficiencyDetailed discussion comparing and contrasting leasing versus purchasing. Includes at least one example to support assertions.0C – 2 – CompetenceBasic discussion comparing and contrasting leasing versus purchasing.0F – 1 – No PassInsufficient discussion comparing and contrasting leasing versus purchasing.0I – 0 – Not SubmittedNot Submitted0
  • Criterion 2
    0% of total gradeA – 4 – MasteryClear and thorough calculations of the figures relative to the principal payment, interest payment, maintenance expense, total expense, and PV expense.0B – 3 – ProficiencyDetailed calculations of the figures relative to the principal payment, interest payment, maintenance expense, total expense, and PV expense.0C – 2 – CompetenceBasic calculations of the figures relative to the principal payment, interest payment, maintenance expense, total expense, and PV expense.0F – 1 – No PassInsufficient calculations of the figures relative to the principal payment, interest payment, maintenance expense, total expense, and PV expense.0I – 0 – Not SubmittedNot Submitted0
  • Criterion 3
    0% of total gradeA – 4 – MasteryClear and thorough explanation of the costs associated with leasing the equipment as depicted in the tables.0B – 3 – ProficiencyDetailed explanation of the costs associated with leasing the equipment as depicted in the tables.0C – 2 – CompetenceBasic explanation of the costs associated with leasing the equipment as depicted in the tables.0F – 1 – No PassInsufficient explanation of the costs associated with leasing the equipment as depicted in the tables.0I – 0 – Not SubmittedNot Submitted0
  • Criterion 4
    0% of total gradeA – 4 – MasteryClear and thorough explanation of the costs associated with purchasing the equipment as depicted in the tables.0B – 3 – ProficiencyDetailed explanation of the costs associated with purchasing the equipment as depicted in the tables.0C – 2 – CompetenceBasic explanation of the costs associated with purchasing the equipment as depicted in the tables.0F – 1 – No PassInsufficient explanation of the costs associated with purchasing the equipment as depicted in the tables.0I – 0 – Not SubmittedNot Submitted0
  • Criterion 5
    0% of total gradeA – 4 – MasteryClear and thorough discussion on the potential tax implications of leasing the equipment.0B – 3 – ProficiencyDetailed discussion on the potential tax implications of leasing the equipment.0C – 2 – CompetenceBasic discussion on the potential tax implications of leasing the equipment.0F – 1 – No PassInsufficient discussion on the potential tax implications of leasing the equipment.0I – 0 – Not SubmittedNot Submitted0
  • Criterion 6
    0% of total gradeA – 4 – MasteryClear and thorough discussion on the potential tax implications of purchasing the equipment.0B – 3 – ProficiencyDetailed discussion on the potential tax implications of purchasing the equipment.0C – 2 – CompetenceBasic discussion on the potential tax implications of purchasing the equipment.0F – 1 – No PassInsufficient discussion on the potential tax implications of purchasing the equipment.0I – 0 – Not SubmittedNot Submitted0
  • Criterion 7
    0% of total gradeA – 4 – MasteryComprehensive recommendations for a course of action and the implications that the recommendation may have for the organization.0B – 3 – ProficiencyElaborative recommendations for a course of action and the implications that the recommendation may have for the organization.0C – 2 – CompetenceBasic recommendations for a course of action and the implications that the recommendation may have for the organization.0F – 1 – No PassInsufficient recommendation for course of action and the implications that the recommendation may have for the organization.0I – 0 – Not SubmittedNot Submitted0
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