Assume zero taxes. Equipment can be leased at $10,000 per year (first payment 1 year hence) for
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Assume zero taxes. Equipment can be leased at $10,000 per year
(first payment 1 year hence) for 10 years or purchased at a cost of
$64,177. The company has a weighted average cost ofcapital of 15 percent. A bank has indicated that it would be willing to make the loan of$64,177 at a cost oflO percent.
Should the company buy or lease? There are no uncertainties. The equipment will be used for to years. There is zero salvage value.
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