Replacement Decisions and Lease Versus Buy Decisions
Two variations on the typical investment decision are the replacement decision and the lease versus buy decision, though the latter could arguably be classified as a financing, rather than investment, decision. However, for many smaller companies leasing provides an alternative method of financing an asset where the capital cost may otherwise be prohibitive. Similarly, certain industry sectors, such as the airline industry, rely heavily on lease finance.
A replacement decision may warrant consideration when improvements in technology offer either production cost reductions or enhancements to the product itself. The latter are usually driven by R and D investments and do not significantly ...
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