Question

In the chapter about owning versus leasing, one set of examples compares the cost of owning versus the cost of leasing for Southside Clinic, a not-for-profit organization. The net advantage to owning (versus leasing) for Southside amounted to $676. The difference between the two methods of financing:

Answer 1

Answer: C) is so small that it might be disregarded and may be considered as a nearly neutral comparison between the two methods.

Step-by-step explanation:

In this chapter reading from the textbook Health Care Finance, it is shown that the Present Value of owning for Southside Clinic is $46,595 and the Present Value cost of leasing is $47,271 which brings the difference to $676.

This figure is considered so small it might be disregarded and may be considered as a nearly neutral comparison between the two methods because it is significantly smaller than the costs associated with either leasing or owning with it being less than 2% of both. It is therefore inconsequential.