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Apr
Warning: strtotime() [function.strtotime]: It is not safe to rely on the system's timezone settings. You are *required* to use the date.timezone setting or the date_default_timezone_set() function. In case you used any of those methods and you are still getting this warning, you most likely misspelled the timezone identifier. We selected 'America/New_York' for 'EST/-5.0/no DST' instead in /home/frodr/public_html/msofficetuneup.com/wp-includes/functions.php on line 35
Warning: date() [function.date]: It is not safe to rely on the system's timezone settings. You are *required* to use the date.timezone setting or the date_default_timezone_set() function. In case you used any of those methods and you are still getting this warning, you most likely misspelled the timezone identifier. We selected 'America/New_York' for 'EST/-5.0/no DST' instead in /home/frodr/public_html/msofficetuneup.com/wp-includes/functions.php on line 107
Warning: date() [function.date]: It is not safe to rely on the system's timezone settings. You are *required* to use the date.timezone setting or the date_default_timezone_set() function. In case you used any of those methods and you are still getting this warning, you most likely misspelled the timezone identifier. We selected 'America/New_York' for 'EST/-5.0/no DST' instead in /home/frodr/public_html/msofficetuneup.com/wp-includes/functions.php on line 109
Warning: date() [function.date]: It is not safe to rely on the system's timezone settings. You are *required* to use the date.timezone setting or the date_default_timezone_set() function. In case you used any of those methods and you are still getting this warning, you most likely misspelled the timezone identifier. We selected 'America/New_York' for 'EST/-5.0/no DST' instead in /home/frodr/public_html/msofficetuneup.com/wp-includes/functions.php on line 111
Warning: date() [function.date]: It is not safe to rely on the system's timezone settings. You are *required* to use the date.timezone setting or the date_default_timezone_set() function. In case you used any of those methods and you are still getting this warning, you most likely misspelled the timezone identifier. We selected 'America/New_York' for 'EST/-5.0/no DST' instead in /home/frodr/public_html/msofficetuneup.com/wp-includes/functions.php on line 112
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Another common business conundrum is whether to purchase equipment outright or to lease it. To make such a decision, you figure the present value of both options and then compare the results, with the preferable option being the one that provides the lower preÂsent value. (I’m going to ignore complicating factors such as depreciation and taxes.)
Assume (for now) that the purchased equipment has no market value at the end of the term and that the leased equipment has no residual value at the end of the lease. In this case, the present value of the purchase option is simply the purchase price. For the lease option, you determine the present value using the following form of the PV() function:
=PV(discount rate, lease term, lease payment)
For the discount rate, you plug in a value that represents either a current investment rate or a current loan rate. For example, if you could invest the lease payment and get, say, 6 percent per year, you would plug 6 percent into the function as the rate argument.
For example, suppose that you can either purchase a piece of equipment for $5,000 now or lease the equipment for $240 a month over 2 years. Assuming a discount rate of 6 percent, what’s the present value of the leasing option? Figure 1 shows a worksheet that calcuÂlates the answer: $5,415.09. This means that purchasing the equipment is the less costly choice.
Figure 1 Using the PV()function to compare buying verÂsus leasing equipment.
What if the equipment has a future market value (on the purchase side) or a residual value (on the lease side)? This won’t make much difference in terms of which option is better because the future value of the equipment raises the two present values by about the same amount. However, note how you calculate the present value for the purchase option:
=purchase price + PV(discount rate, term, 0, future value)
That is, the present value of the purchase option is the price plus the present value of the equipment’s future market value. (For the lease option, include the residual value as the PV() function’s fv argument.) Figure 2 shows the worksheet with a future value added.
Figure 2 Using the PV()function to compare buying verÂsus leasing equipment that has a future market or residual value.
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