CIPS L4M7 Exam - Topic 10 Question 53 Discussion

Actual exam question for CIPS's L4M7 exam

Question #: 53
Topic #: 10

A construction organization requires specialist equipment for digging deep foundations. Which of the following circumstances would result in the hire of equipment rather than leasing it?

A. The finance available and the potential profits available on the eventual sale of the leased equipment compared to hire costs B. The expected frequency of use, the storage available, and the lease cost of the equipment compared to hiring it C. The subjective assessment of multiple factors for both hire and lease by the directors D. The results of a discounted cost analysis using comparative weekly payments for both hire and lease options

Show Suggested Answer

Suggested Answer:

Hiring is often preferred when:

Frequency of use is low: If equipment is only needed occasionally, hiring is more economical.

Storage is unavailable: Leased equipment needs storage, which incurs additional costs.

Lease costs exceed hiring costs for limited use.

Whole-life asset management emphasizes cost-efficient solutions, and hiring equipment for limited use reduces unnecessary expenses compared to leasing or purchasing.

by Cyril at Jan 25, 2025, 05:06 PM

Limited Time Offer

25%

Off

Get Premium L4M7 Questions as Interactive Web-Based Practice Test or PDF

Contribute your Thoughts:

Submit Cancel

Craig

9 months ago

I’m surprised no one mentioned maintenance costs!

upvoted 0 times

...

Tamera

9 months ago

A is a solid point too, finance plays a huge role.

upvoted 0 times

...

Millie

10 months ago

Wait, are we really trusting directors to make the best call?

upvoted 0 times

...

Florinda

10 months ago

I think C is also important, directors need to weigh all options.

upvoted 0 times

...

Tequila

10 months ago

Definitely B, frequency of use matters a lot!

upvoted 0 times

...

Felicia

10 months ago

I wonder if option C is too vague? I remember we talked about subjective assessments, but I thought they should be backed by data.

upvoted 0 times

...

Fletcher

11 months ago

I feel like option A could be relevant too, especially if the finance and profit margins are tight, but I can't recall the specifics.

upvoted 0 times

...

Georgeanna

11 months ago

I'm not entirely sure, but I remember something about discounted cost analysis being important, so maybe option D is also a good choice?

upvoted 0 times

...

Carlee

11 months ago

I think option B makes the most sense since it considers how often the equipment will be used and storage, which we discussed in class.

upvoted 0 times

...

Elroy

11 months ago

Hmm, I'm a bit unsure how to approach this. I guess I'd start by looking at the financial details in A and D, but the other factors in B and C are also relevant. Might need to do some calculations to figure out the best option.

upvoted 0 times

...

Danilo

11 months ago

The question is asking about the circumstances that would lead to hiring equipment rather than leasing. So I'd focus on comparing the costs and logistics of each option, as mentioned in B and D.

upvoted 0 times

...

Mitsue

11 months ago

This seems like a tricky one. I'd want to look at the financial factors in A and D, but the subjective assessment in C could also be important. Might need to weigh multiple factors to decide.

upvoted 0 times

...

Kimberely

11 months ago

I'd start by considering the expected frequency of use and storage availability - that seems like a key factor in B. Then I'd do a discounted cost analysis to compare the weekly payments for hire vs lease.

upvoted 0 times

...

Kanisha

2 years ago

Option C? Really? I bet the directors would just throw a dart at the options and call it a day!

upvoted 0 times

Stefania

1 year ago

Haha, maybe they do just throw a dart at the options!

upvoted 0 times

...

Mayra

1 year ago

D. The results of a discounted cost analysis using comparative weekly payments for both hire and lease options

upvoted 0 times

...

Frank

1 year ago

B. The expected frequency of use, the storage available, and the lease cost of the equipment compared to hiring it

upvoted 0 times

...

Leila

2 years ago

A. The finance available and the potential profits available on the eventual sale of the leased equipment compared to hire costs

upvoted 0 times

...

Janey

2 years ago

I think a discounted cost analysis would provide a clear answer.

upvoted 0 times

...

Jonell

2 years ago

That's true, but I think overall cost and convenience should be the main focus.

upvoted 0 times

...

Lonny

2 years ago

But what about the potential profits from selling the leased equipment?

upvoted 0 times

...

Gerri

2 years ago

This is a tough one, but I agree with Jesus. A discounted cost analysis is essential to make an informed decision.

upvoted 0 times

Deeann

1 year ago

True, we need to weigh all the factors before deciding whether to hire or lease the equipment.

upvoted 0 times

...

Mollie

1 year ago

But what about the frequency of use and storage availability? Those are important factors too.

upvoted 0 times

...

Josefa

2 years ago

I agree, a discounted cost analysis will help us make a more informed decision.

upvoted 0 times

...

Troy

2 years ago

I think option D makes the most sense. We need to consider the long-term costs.

upvoted 0 times

...

Janey

2 years ago

I agree, the frequency of use and storage availability are crucial.

upvoted 0 times

...

Yaeko

2 years ago

I can see the merit in option A, but it really depends on the organization's financial situation and long-term goals with the equipment.

upvoted 0 times

Alica

2 years ago

I agree, it's important to consider the financial aspects and potential profits before making a decision.

upvoted 0 times

...

Deeann

2 years ago

Option A seems like a good choice if the organization can make a profit from selling the equipment later on.

upvoted 0 times

...

Jonell

2 years ago

I think option B is the most important factor to consider.

upvoted 0 times

...

Jesus

2 years ago

I was leaning towards option D, but you make a good point, Miesha. The weekly payments for both options need to be carefully analyzed.

upvoted 0 times

...

Miesha

2 years ago

Hmm, I'd say option B is the way to go. The frequency of use and storage availability are crucial factors when deciding between hiring or leasing equipment.

upvoted 0 times

Sue

2 years ago

It's important to weigh the lease cost against the potential benefits of hiring the equipment.

upvoted 0 times

...

Otis

2 years ago

Definitely, those factors can make a big difference in the decision-making process.

upvoted 0 times

...

Bette

2 years ago

I agree, the frequency of use and storage availability are key considerations.

upvoted 0 times

...