Question
A company is looking to add an equipment. The Equipment would cost $250,000 if purchased; it would be depreciated straight-line to zero salvage over 5
A company is looking to add an equipment. The Equipment would cost $250,000 if purchased; it would be depreciated straight-line to zero salvage over 5 years. Alternatively, it may be leased for $65,000/yr. The firms after-tax cost of debt is 6%, and its tax rate is 40%
a) What are the lease cash flows?
b) What is the net advantage to leasing (NAL) of the lease?
c) What decision should be made?
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Fundamentals Of Corporate Finance
Authors: Robert Parrino, David S. Kidwell, Thomas W. Bates
5th Edition
1119795435, 978-1119795438
