PMP Formula of the Week: Rent, Lease or Buy?

August 17, 2015 Guest Authors Cisco, Cloudera, Featured, Professional Development, Project Management, Routing & Switching, Technology, Training in Business

You are the project manager on a construction project where you are deliberating between renting, leasing or purchasing a large piece of equipment.

Equipment pricing:

Rent at a cost of $2,500 per day.
Lease for a 60 day period at $2,500 per day, with a 10% discount.
Purchase at a price of $100,000.

By looking at your project schedule, you have estimated that you will use the equipment about 50 to 60 days. Based only on price, which decision would you recommend?

A. Purchase the equipment.
B. Lease the equipment.
C. Rent the equipment.
D. You do not have enough information to make a determination.

Reveal Answer

The correct answer is A.

You can purchase the equipment for $100,000, whereas renting the equipment for 50 to 60 days would cost $125,000 to $150,000 or leasing the equipment for 60 days would cost $135,000.

Therefore, based only on price, the better choice is to purchase the equipment, answer A, rather than renting, answer C, or leasing, answer B.

PMP Formula of the Week Series

PMP Formula of the Week: Forecasting a Necessary CPI
PMP Formula of the Week: Forecasting a Necessary CPI Based on an ETC
PMP Formula of the Week: Ahead or Behind Schedule
PMP Formula of the Week: Point of Total Assumption
PMP Formula of the Week: Rent, Lease or Buy?

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