BCO315 Corporate Finance
BCO315 Corporate Finance
CASE 1 (20 points)
You work for Orbi Medical Technologies that are contemplating leasing a diagnostic scanner (leasing
is a very common practice with expensive, high-tech equipment). The scanner costs €4,800,000, and
it would be depreciated straight-line to zero over four years. Because of short cycle of the
technological equipment the scanner will be completely valueless in four years. You can lease it for
€1,430,000 per year for four years at a borrowing interest rate of 8% – ignore taxes for the purpose
of this exercise.
Instructions:
a. Create a lease-versus-buy analysis. Should you lease or buy? (10 points)
b. What are the differences between an operating lease and a financial lease – advantages and
disadvantages? Please describe in a detailed manner you answer. (10 points)
DETAILED ASSIGNMENT
