Question
Airmax is considering leasing a new equipment. The lease lasts for 5 years. The lease calls for 5 payments of $11,300 per year with the
Airmax is considering leasing a new equipment. The lease lasts for 5 years. The lease calls for 5 payments of $11,300 per year with the first payment occurring immediately. The equipment would cost $44,000 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 25%. What is the after-tax cash flow from leasing relative to the after-tax cash flow from purchasing in year 2?
| $9,575 | ||
| $9,725 | ||
| -$8,800 | ||
| -$10,675 | ||
| -$11,300 |
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Intermediate Financial Management
Authors: Brigham, Daves
10th Edition
978-1439051764, 1111783659, 9780324594690, 1439051763, 9781111783655, 324594690, 978-1111021573
