Suppose that the purchase price for a piece of equipment is $12,000, with operational costs of $400 per day. If the same equipment can be leased for $800 per day (inclusive of operational costs), after how many days will the lease cost equal the purchase cost? 1. 60 2. 30 3. 15 4. 10

The lease cost will equal the purchase cost in 30 DAYS

Explanation:

The purchase price of the equipment is about $12,000.

The operational costs of the same equipment per day is abi $400.

The equipment is able to be leased for $800 per day inclusive of the operational costs.

Before proceeding to solve and consequently determine the number of days the lease cost will equal the purchase cost, it is necessary that the daily operational costs is subtracted from the total daily lease cost:-

Therefore $800 (total lease cost) - $400 (the operational costs)

= $400

Since the lease (exclusive of operational costs) yields 400 daily, the number of days the lease cost will equal the purchase cost:

$400 1 day

$12000(purchase cost) ?

Therefore, (12000/4000)× (1/1)

120/4

= 30 days.

This means that the lease cost will certainly equal the purchase cost in 30 days.

3) 15

Explanation:

If the purchase price of the equipment is $12,000 and the lease price is $800 per day, in 15 days you could purchase the equipment instead of leasing it = $12,000 / $800 = 15

Operational costs are the same whether the equipment is leased or purchased, e.g. a company that uses a truck will have to pay for the fuel, driver and maintenance costs (operational costs) regardless of whether they purchased or leased the truck.

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