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Equipment can be leased at $13000 per year (first payment at end of year) for nine years or purchased at a cost of $9000
Posted: Thu May 19, 2022 12:13 am
by answerhappygod
- Equipment Can Be Leased At 13000 Per Year First Payment At End Of Year For Nine Years Or Purchased At A Cost Of 9000 1 (55.57 KiB) Viewed 30 times
Equipment can be leased at $13000 per year (first payment at end of year) for nine years or purchased at a cost of $90000. A bank has indicated that it would be willing to make the loan of $90000 at a cost of 7%. There is no salvage value. Should the
company buy or lease? Now assume a marginal tax rate of 30% and that a loan can be obtained from the bank at a cost of 8%. The PV of the depreciation expense is 85% of the original investment. Assume a 5.6% discount rate after tax. Buy: PV of Buy option lower than Lease option Lease; PV of Buy option lower than Lease option none of them Lease; PV of Lease option lower than Buy option Buy: PV of Lease option lower than Buy option