Independent Learning Packages

Examine the Different Finance Options

Icon Office Solutions, a telephone answering service for small businesses, has recently opened its sixth branch. The company has investigated the possibility of updating the photocopiers in its offices and has decided that there are three different options available:

  • Purchase the photocopiers outright from its retained profits
  • Rent them for 12 months
  • Pay for them using a bank loan to be repaid over 12 months

The cost of each option is as follows:
  • Cost of each photocopier: £2,300
  • Monthly rental charge for each photocopier: £180
  • Annual interest charged for a bank loan: 8%

Questions:

1. Calculate how much it would cost to:
  • a) Buy the six photocopiers from retained profit
  • b) Rent the photocopiers for 12 months
  • c) Buy the photocopiers using a bank loan

2. List the advantages and disadvantages of each option
  • a) Buying the six photocopiers from retained profit
  • b) Renting the photocopiers for 12 months
  • c) Buying the photocopiers using a bank loan

3. Write a short report to the Board of Directors which describes which option you would choose and why

3: Why Do Businesses Need Money?
4: Where Do Businesses Get Money?

To the Starting Point
To the Starting Point

To the Pivot Point
To the Pivot Point