User Manual

46 BA II PLUS™ Calculator

Lease-or-Buy Decision

Your business is considering getting a new computer server. If

you lease, you would pay $36,000 per year for five years at the

first of each year. You could buy it for $125,000. The server is

expected to save the company $46,000 per year. It will have no

resale value at the end of the five years. The company can

borrow at 15% annual interest. You require a 20% annual return

on projects and investments of this kind. Ignoring tax effects,

should you acquire it, and if so, should you lease or purchase it?

Example: Present Value of Cost Savings

Procedure Keystrokes Display

Set all variables to defaults.

}

RST 0.00

Set payments per year to 1.

[

P/Y= 1.00



Return to calculator mode.

0.00

Enter number of periods.

N= 5.00



Enter required annual return

rate.

I/Y= 20.00



Enter annual savings.

46000

PMT= -46,000.00



Compute present value of

savings.

PV= 137,568.16

…

The present value of the annual savings exceeds the purchase

price (i.e., the investment will exceed your annual required

return rate). Acquiring the server is a good financial move.

Should you lease or buy it?