Question
A company is considering leasing a new equipment. The lease lasts for 5 years. The lease calls for 5 payments of $58,000 per year with
A company is considering leasing a new equipment. The lease lasts for 5 years. The lease calls for 5 payments of $58,000 per year with the first payment occurring immediately. The equipment would cost $250,000 to buy and would be straight-line depreciated to a zero salvage value over 5 years. The actual salvage value is negligible because of technological obsolescence. The firm can borrow at a rate of 6%. The corporate tax rate is 24 percent. What is the after-tax cash flow from leasing relative to the after-tax cash flow from purchasing in year 0? $203,600 $204,180 $204,760 $205,340 $205,920
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