Case Number: 7-404-753, Year Published: 2004
HBS Number: KEL263
Decision Making, IT, Lease Versus Buy, Purchasing Decisions, Leasing Equipment, Lease Rate Factor, MACRS, Depreciation, Equity Insertion
This technical note illustrates the fundamentals of lease vs. buy decisions in technology and how they differ from the typical capital equipment lease vs. buy decision. This note is designed for instructors, and provides them with a background for an introductory lecture on information technology (IT) leasing. It can also function as a companion to the Kellogg cases “AMG, Inc. & Forsythe Solutions: Lease vs. Buy Decisions” and “Shilling & Smith Acquisition of Xteria Inc.: Data Center Technology Leasing.”
By working through the problem set provided in this note, students will learn how to calculate lease rate factors and how to use them in order to evaluate the benefits and drawbacks of leasing technology equipment.
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