Real estate and capital structure decisions- Lease versus Buy Analysis Essay

Real estate and capital structure decisions- permit versus Buy Analysis - Essay ExampleIf the study proves to be promising, that the company will most probably to expand in 2-3 years, the idea of buying a space could then be possible---but it still index non be the best option.Company expansion may not even mean an continuation of the same space. It would sometimes be practical, and this is what most businessmen prefer, to rent a space from a opposite area. This aims to win a different market and could then maximize company profits, or at times, if it is not a marketing company, this option will give its clients an option on which office is more accessible.another(prenominal)(prenominal) factor is the present company financial status on the STLs immediate needs. Having a cardinal full-time staff, STL could then be considered as a small enterprise, and its financial statements show that STL is not earning a quite impressive profit in fact, the statement indicates that the compa ny will be immediately impact of the lease rent increase.Below is an illustration of a basic computation to determine the distinction on the lease expense and the purchase option. The trading company is currently paying an annual amount of HK$970,000 or HK$80,833.333 every month, whereas, an additional ten percent would require the company to spend HK$1,067,000 every year or HK$88916.667 each month. This amount, when multiplied by 10, would make the company an allotment of HK$10, 670,000. Please note the possibility of another increase for the lease. This would be dependent on the length of time of the contract, if STL has a 10-year lease contract it is not likely to endure another footing rise. The amount, however, was multiplied by ten, for the anticipation of a ten- year-mortgage should the company see to purchase its own space.The interest would depend on the market and economy however, it is evident that the purchase price does not have a great difference in amount. The purc hase