Lease Versus purchase
p5. Wooster Corporation can either lease or buy a small garage next to its business that will provide parking for its customers. The company can lease the building for a period of 12 years, which approximates the useful life of the facility and thus qualifies as a capital lease. The terms of the lease are payments of $24,000 per year for 12 years. Wooster currently is able to borrow money at a long-term interest rate of 9 percent. The company can purchase the building by signing an $160,000 long-term mortgage with monthly payments of $2,000. The mortgage also carries an interest rate of 9 percent.
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