I am trying to do an analysis using NPV to determine whether to buy or lease.
First what exactly is the discount rate? Would it be, if I took the money today and invested it, the return I would get?
Here is my buy information (no financing):
Purchase price: $198,000
With a shipping cost of: $10,512.14
And a monthly service fee of: $3,306.06
Discount rate of: 2.5%
Returns: Year 1 – 2%, Year 2 – 5%, Years 3-6 – 6%
What would my NPV be?
I am getting ($281,099.57)
To Lease the information is:
Monthly Lease price: $3,860.55
Monthly service fee: $3,306.06
And a shipping cost of: $10,506.45
Same discount rate and Returns
What is this NPV?
Here I am getting: ($207,325.75)
I keep getting negative NPV’s
If that is correct does that mean, if negative to consider leasing?
And if I take the difference between the Buy and Lease NPV’s less the Purchase price, would that give me a price to consider buying?
$198,000-$73,773.82= $124,226.18 – if this price to consider purchasing?
Also, what is the IRR?
Thank you for your help