Question
A person wants to set up a bookstore but has not yet decided whether to rent or buy a store. The rent would cost $24,000
A person wants to set up a bookstore but has not yet decided whether to rent or buy a store. The rent would cost $24,000 a year that must be paid in advance. If you buy it, could depreciate the investment on a straight-line basis over a useful life of 15 years, after which could still recover 20% of the investment. Under any alternative you have calculated that Your income before depreciation and taxes would be $78,000 per year. If the tax rate he pays is 40% and the reference MARR is 10%, what is the maximum amount he must invest so that you are indifferent to buying or renting the premises?
Answer: $164,616.
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