Leasing Case Study Example | Topics and Well Written Essays - 500 words

Leasing - Case Study Example However, the disadvantage to leasing is that, if circumstances dictate that a business must change its operations significantly, it may be expensive or otherwise difficult to terminate a lease before the end of the term. (Wikipedia contributors 2006) For example, if Hasbro finds Maxie a failing project at the middle of the leasing term, it is expensive or difficult for Hasbro to terminate the lease. 8. At the end of the five year lease period, Hasbro would base two factors to determine their decision of whether or not to buy the machinery. The first factor is whether the "wear and tear" level of the machinery is more than or less than it should be as a five-year-old one. If it happens that the leased machinery is so "worn and torn" that it doesn't even worth $6,000 at the end of the lease, Hasbro would not buy it at the end of the lease definitely. The second factor is, considering the technological advancement within the five-year period, some more efficient machinery might have been produced. In this case, Hasbro would recalculate the profit and costs of purchasing a newer model before making their decision of whether or not to buy the machinery at the end of the lease.