Ray owns a gym and he needs equipment for a new workout class. He has two different options:

Question

• Lease equipment for $1100 per month.
• Purchase new equipment for $24 000 which he will finance with a bank loan that charges an interest rate of 7.1%, compounded monthly. He will pay off the loan in 2 years with regular monthly payments. After 2 years, he can sell the equipment for $3800.
The workout class runs 3 days a week and he expects to make $285 for each day that the workout class is run.
a) How much profit will Ray make over 2 years if he leases the equipment?
b) How much profit will Ray make over 2 years if he buys the equipment?