User Manual

Investment Analysis
Lease vs. Purchase
An investment decision frequently encountered is the decision to lease or
purchase capital equipment or buildings. Although a thorough evaluation of a
complex acquisition usually requires the services of a qualified accountant, it is
possible to simplify a number of the assumptions to produce a first
approximation.
The following HP-12C program assumes that the purchase is financed with a
loan and that the loan is made for the term of the lease. The tax advantages of
interest paid, depreciation, and the investment credit which accrues from
ownership are compared to the tax advantage of treating the lease payment as
an expense. The resulting cash flows are discounted to the present at the firm's
after-tax cost of capital.
KEYSTROKES DISPLAY
CLEAR
00-
01- 30
1
02- 1
0
03-44 40 0
3
04- 45 3
05- 30
06- 20
8
07- 44 8
1
08- 1
09- 42 11
1
10- 44 1
11- 45 13
9
12- 44 9
13- 45 14
0
14-44 48 0