Texas Instruments BA II Plus User Manual

46 BA II PLUS™ Calculator
Lease-or-Buy Decision
Your business is considering getting a new computer server. If
you lease, you would pay $36,000 per year for five years at the
first of each year. You could buy it for $125,000. The server is
expected to save the company $46,000 per year. It will have no
resale value at the end of the five years. The company can
borrow at 15% annual interest. You require a 20% annual return
on projects and investments of this kind. Ignoring tax effects,
should you acquire it, and if so, should you lease or purchase it?
Example: Present Value of Cost Savings
Procedure Keystrokes Display
Set all variables to defaults.
& } !
RST 0.00
Set payments per year to 1.
& [
1
!
P/Y= 1.00

Return to calculator mode.
& U
0.00
Enter number of periods.
5
,
N= 5.00

Enter required annual return
rate.
20
-
I/Y= 20.00

Enter annual savings.
46000
S /
PMT= -46,000.00

Compute present value of
savings.
% .
PV= 137,568.16
…
The present value of the annual savings exceeds the purchase
price (i.e., the investment will exceed your annual required
return rate). Acquiring the server is a good financial move.
Should you lease or buy it?

Texas Instruments BA II Plus Specifications

General

Type	Financial
Cover	-
Form factor	Pocket
Control type	Buttons
Product color	Black
Digits	10 digits
Display tilting	No
Display number of lines	1 lines
Memory registers	10
Power source	Battery