can anyone please help me clear a basic doubt,
Suppose silicon has 1 computer of 30k with 3 years of life and a straight line depreciation with 0 residual value. So every year in silicon books 10k is a cost + employee expense and operating expense. Lets say total cost is 13k now if I give this computer on rent then silicon should be charging more than 13k to be profitable???
if they are charging 13k then why is they person who is renting paying more when he can simply purchase the asset and depreciate at 10k??
now counter to this is the buyer might be differing high fixed cost and on that deferred cash flow he is generating returns which is more than the premium to depreciation which he is paying.
again then another doubt comes up if the buyer had purchased the asset then in accounting he would depreciate in 3yrs so residual value would go to zero but he can still sell the computer and make money which would be profit, so the I dont save much even with differing cost and paying rent from buyer perspective.
it comes down to the point that why is the buyer renting when buying would have lower dep hence renting is reducing the buyer P&L.
please if somebody can explain
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