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4.2 Low Gear company, an automotive specialty firm, is considering the acquisition of a new Differential locks manufacturing machine. Low Gear can purchase the machine
4.2 Low Gear company, an automotive specialty firm, is considering the acquisition of a new Differential locks manufacturing machine. Low Gear can purchase the machine through the use of its normal financing mix (45% deb and 55% common equity) or lease it. Pertinent details follow: $ 155,000 4 years Aquisition Useful life Salvage value Depreciation method Annual cash savings before tax and dapreciation from the machine Rate of interest Marginal tax rate Arinal rentals Annual operating expenses included in the lease Cost of capital $ 15,000 straight line $36.000 12% 4098 $ 45,000 $4,750 149 Should Low Gear lease the asset
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