As part of the Wellness Centre Project, the plan is to build a small gym on the rooftop of the hotel. You have been appointed to help the Sales and Marketing manager to make decision whether to rent or buy specific equipment items. The required items are included in Appendix 1 together with costing information. The budget for the required equipment is $45,000 for the life of the equipment. The useful life of the equipment is predicted to be 3 years after which it will need to be replaced. At the end of its useful life, it is expected to be sold for the residual value of 5% of its original cost. From the renting options, choose the one that is the most beneficial for the business. The rent is expected to rise by 3% each year. The rent is paid at the beginning of each period. Servicing of the equipment is included in the rent price.
Assume that servicing its own equipment will cost the hotel additional $600 every year over the period of its useful life. Assume that servicing is done at the end of each year. Ignore GST for the purpose of this assessment task.
REQUIRED The manager would like to know whether it would be better for the Hotel to buy the required equipment or to rent it. Explore both options and make a recommendation. Take into account the time value of money at the discount rate of 8%. Base your decision on the total cost of the specified equipment, not on an item by item basis.
All calculations are to be done in Excel. Summarise your findings in the business report. Include advantages and disadvantages of each option and explain your choice

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