In March 2014, Arco Corporation decides to acquire some heavy equipment (this is in addition to the

Question:

In March 2014, Arco decides to acquire some heavy equipment (this is in addition to the $2,500,000 in equipment purchased in January of this year). The new equipment is 7-year class property, but Arco expects that it will be able to use the equipment for 8 years. It could purchase the equipment for $120,000 cash, and at the end of 8 years it would have no . Alternatively, Arco could lease the equipment for 8 years for $22,000 annually. Arco is in the 35 percent marginal tax bracket and uses a 6 percent for evaluation. Should Arco purchase or lease the equipment? Prepare a schedule showing your calculations to support your recommendation.
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