Paying full retail price upfront (C.O.D.), borrowing against an operating line, or using bond money are excellent options in many circumstances; but rarely are these the best options when it comes to acquiring depreciating capital equipment.
To my first point, paying retail price for a data center upgrade upfront is never a good idea - where's the ROI in that? We all know a dollar today is worth more than a dollar in five years (in theory); so save the money! These funds should be invested in areas of the business that produce a return. Savvy finance chiefs understand that this type of equipment is changing so rapidly, that businesses will be locked in with this equipment until it is fully depreciated, out of useful life, or worse, until it creates a situation that costs a lot of additional money to fix the aforementioned acquisition.
When looking at a business's internal cost of funds, it only makes sense to include an implicit rate in this analyses as well. The implied rate is only fair given the lessor's investment in the equipment. Generally, this rate turns out to be a negative rate given the lessor's investment.
Finally, let's suggest a hospital issues a 30-year bond to build a new hospital wing. Aside from the upfront cost to issue the bond (which could be several hundred thousand dollars), the hospital uses the 30 year bond money to buy new computers. While this is an easy option, it doesn't make financial sense. I always encourage hospitals to "pull out the IT portion" of the new wing to make sure the useful life and book life are more closely tied together. In addition to being more financially responsible, it creates the flexibility needed to ensure the capital is available for new equipment when the useful life is coming close to an end.
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