1.Should Warf buy or lease the equipment?
2.In the leasing discussion, James informs Nick that the contract could include a purchase option for the equipment at the end of the lease. Hendrix Leasing offers three purchase options:
a.An option to purchase the equipment at the fair market value.
b.An option to purchase the equipment at a fixed price. The price will be negotiated before the lease is signed.
c.An option to purchase the equipment at a price of $250,000.
How would the inclusion of a purchase option affect the value of the lease?
3.James also informs Nick that the lease contract can include a cancellation option. The cancellation option would allow Warf Computers to cancel the lease on any anniversary date of the contract. To cancel the lease, Warf Computers would be required to give 30 days’ notice prior to the anniversary date. How would the inclusion of a cancellation option affect the value of the lease?
