1. Leasing vs. Buying Computers for an Engineering Firm Project Presentation Team 1 EGR 403 – Section 02 6-7:50pm T/Th

2. Our Roles Team 1 Members Jacob Hagman – Organizer Jacob Hagman – Organizer Justino Rojas – Techie Justino Rojas – Techie Micheal Jones – Techie Micheal Jones – Techie John AmirAbbassi – Summarizer John AmirAbbassi – Summarizer

3. Our Project To analyze the options of leasing vs. purchasing a set of 50 workstations for an engineering firm To analyze the options of leasing vs. purchasing a set of 50 workstations for an engineering firm High End Machines High End Machines Estimating 3 Year Term Estimating 3 Year Term Manufacturers: Dell vs. IBM Manufacturers: Dell vs. IBM

4. Evaluating our Options Advantages of Leasing Advantages of Leasing You can get much more equipment at once, since you don't have to pay for all of it in a lump sum. You can get much more equipment at once, since you don't have to pay for all of it in a lump sum. You can spread payments over time on a regular and predictable basis. You can spread payments over time on a regular and predictable basis. You can afford to keep all of your hardware at much the same level. You can afford to keep all of your hardware at much the same level. Equipment warranties also often last the same period as a lease. Equipment warranties also often last the same period as a lease.

5. Evaluating our Options Disadvantages of Leasing Disadvantages of Leasing You don't own the equipment so you must be more careful what you do with it. You don't own the equipment so you must be more careful what you do with it. You won't want to spend money to customize, expand, or modify the equipment unless you want to either remove the modifications or lose the money when the equipment is returned. You won't want to spend money to customize, expand, or modify the equipment unless you want to either remove the modifications or lose the money when the equipment is returned.

6. Evaluating our Options Advantages of Purchasing Advantages of Purchasing You own the equipment, so you can do with it what you like, including upgrading it or throwing it away. You own the equipment, so you can do with it what you like, including upgrading it or throwing it away. You may be able to resell it while it has some residual value You may be able to resell it while it has some residual value

7. Evaluating our Options Disadvantages of Purchasing Disadvantages of Purchasing Depreciation & Salvage Value Depreciation & Salvage Value Computers purchased may lead to in-equivalent workstations. Leading to uneven employee productivity and concerns with morale. Computers purchased may lead to in-equivalent workstations. Leading to uneven employee productivity and concerns with morale.

8. Evaluating our Options Disadvantages of Purchasing continued… Disadvantages of Purchasing continued… Support concerns Support concerns Becomes hard to maintain a standard “machine image” with different hardware configurations. Becomes hard to maintain a standard “machine image” with different hardware configurations. Technicians must be able to maintain a variety of operating systems. Technicians must be able to maintain a variety of operating systems. As machines age, some parts become impossible or expensive to find. As machines age, some parts become impossible or expensive to find.

9. Analysis Monthly Payments are not an accurate means of economic analysis Monthly Payments are not an accurate means of economic analysis Annual worth method proved to be most appropriate Annual worth method proved to be most appropriate Two percent fixed loan compared with lease to buy options Two percent fixed loan compared with lease to buy options

10. Analysis Cash flow diagrams observed 2% fixed loan vs lease to buy options Annual Worth Analysis done on both scenarios

11. Conclusions Take out 2% loan and purchase IBM equipment Annual Worth $101,914 Take out 2% loan and purchase IBM equipment Annual Worth $101,914 IBM LTB Annual Worth $84,256 Dell LTB Annual Worth $98,326 Take out 2% loan and purchase Dell equipment Annual Worth $91,997

12. Sensitivity Analysis Other Fixed Loan options Other Fixed Loan options Increase Annual Benefit to $240,000 Increase Annual Benefit to $240,000 No Salvage Value No Salvage Value

13. Web Resources Bankrate – www.bankrate.com Bankrate – www.bankrate.comwww.bankrate.com Covers small business, real estate, mortgage, insurance, and credit information. Provides Finance calculators and investment advice. Covers small business, real estate, mortgage, insurance, and credit information. Provides Finance calculators and investment advice.

14. Web Resources MSN Money – moneycentral.msn.com MSN Money – moneycentral.msn.commoneycentral.msn.com Provides financial information on loans, stocks, leasing, and financial investing. Provides great variety of information pooled from multiple sources. Can forward to mobile devices. Provides financial information on loans, stocks, leasing, and financial investing. Provides great variety of information pooled from multiple sources. Can forward to mobile devices.