Capital Budgeting

[howard]

I need to do a Capital Budgeting Excercise using Excel to find if it is better to lease Computer Software or the Purchase the Software outright.

The Purchase price is 150,000 plus annual maintenace costs of 18000. We anticipate the useful life to be 5 years with no residual/salvage value

The Rental option is 18000 per annuam over 5 years

It would be appreciated if anyone can assist in setting up a spreadsheet showing the Values as well as the Net Present Value

Howard

 

[Norie]

Howard

Maybe I'm missing something but surely the rental option is obviously the best deal.

I mean there's no purchase involved, so no initial outlay of 150,000 and even if you still need to pay for annual maintence that's only going to be 180,000 whereas the purchase option will be 240,000 ie the initial purchase plus 90,000 maintenance.

 

[howard]

Hi Norie

The figures I put on the Board are fictitious as the actual figures are confidential.

I just wanted to know how to set up the comparison Purchase vs Rental on Excel using Present Value of Cash Outflow and determing the NPV.

Regards

Howard

 

[royUK]

See this

http://office.microsoft.com/en-us/templates/TC010525041033.aspx

 

[howard]

Hi Roy

Thanks for your reply.

What i am looking for is doing a Capital Budgeting Excercise what to Rent Computer Software is to Purchase this outright Calculating the Present Value of cash Outflows and then calculating the NPV.

It is a lot different from the example on the Website you kindly provided.

I have not done a Capital Budgeting excercise for Several Years now and am a bit rusty on this.

Hope you can assist be by uploading an example Purchase Vs Rental Option



Regards

Howard

 

[royUK]

Is this better

http://www.excel-it.com/TempFiles/LeasePurchaseOption.xls

 

[howard]

Hi Roy

Thanks for the help

This is great. I will adapt this to my needs. I have taken out my old textboks to refresh my memory on Capital Budgeting. The template has also brought back old memories.

Regards

Howard

 

[royUK]

Glad it helped.