Case Study - Lease vs Rent - Need help
Hey guys, I'm currently working on financial projections for a new business i'm working on. We are going to lease and rent certain types of equipment I hence I have two questions:
(consider we currently sell at 50% gross margin and the selling price of one product is about USD 7.5k)
Example: Client Y wants to enter into a lease contract for 5years at 7% interest rate for a machine that costs brand new $7'500, no down payment and no residual value. My formula says he would need to pay us approx $147 per month for 5 years. Now lets say i offer him to rent the equipment instead, same time period with full service and at the end of the contract I can replace the machine with the new model if it is out.
1) How do you determine the rent price?
2) How lease and rent impact your financial statements? What would be the entries?
All the help will be greatly appreciated :)
Thank you!
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