International Research Journal of Applied Finance

(ISSN 2229-6891)A Decade of Publication(Online + Print journal)

Lease or Buy Decision Analysis: Apollo Manufacturing Corporation Case Study
Ronald Richter    and Arthur S. Guarino* (Rutgers University, USA)
Leasing allows a business flexibility in different ways. Whether it means lower transaction costs for leasing equipment as opposed to purchasing, reducing uncertainty regarding an asset’s residual value, or having fewer restrictive covenants than borrowing. However, there are also potential problems involved in leasing such as higher overall costs, not owning the asset, and maintenance costs the lessee incurs in case the asset breaks down. This case study examines the quantitative analysis a company’s managers must perform in order to best determine whether an asset should be purchased or leased given certain financial considerations and factors.