A DECISION CURVE FOR LEASE OR BUY

A CURVE IS DEVELOPED THAT BALANCES THE ECONOMIC ADVANTAGES OF LEASING AGAINST THE ECONOMIC ADVANTAGES OF PURCHASING IN ORDER TO CHOOSE THE OPTIMAL ALTERNATIVE. THE CURVE IS THE BREAKEVEN FUNCTION OF THE RESIDUAL WORK OF THE EQUIPMENT WITH THE CASH DISCOUNT RATE FOR ALTERNATIVE, AVAILABLE INVESTMENT OPPORTUNITIES. THE OPTIMAL DECISION ON WHETHER TO BUY OR LEASE EQUIPMENT CAN BE MADE BY DETERMINING THE BREAKEVEN RESIDUAL WORTH RATIO. AN EXAMPLE IS USED OF RAILROAD EQUIPMENT. PERMITTING THE DISCOUNT RATE TO VARY, A TABLE IS GIVEN FROM WHICH A DECISION CURVE CAN BE MADE. THE DECISION CURVE PROVIDES A GRAPHIC REPRESENTATION OF A BREAK- EVEN ANALYSIS OF LEASE OR BUY DECISIONS.

• Supplemental Notes:
  • Vol 4, No 1, PP 37-42
• Corporate Authors:

  Management Services

  ,    
• Authors:
  • Hata, K
• Publication Date: 1967-2

Subject/Index Terms

• TRT Terms: Curves (Geometry); Decision making; Economic benefits; Equipment; Leasing; Purchasing; Railroads; Statistical analysis
• Subject Areas: Data and Information Technology; Economics; Freight Transportation; Highways; Railroads; Vehicles and Equipment;

Filing Info

• Accession Number: 00219324
• Record Type: Publication
• Source Agency: Operations Research Management Science
• Files: TRIS
• Created Date: Sep 12 1994 12:00AM