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Assume Right Choice Imaging Center (a for-profit business) plans to acquire a new C-arm machine. If the equipment is leased: The company can obtain
Assume Right Choice Imaging Center (a for-profit business) plans to acquire a new C-arm machine. If the equipment is leased: The company can obtain a 6-year lease that includes maintenance, and has a rental payment of $250,000 at the beginning of each year. The lease meets IRS guidelines. If the machine is purchased: However, if the equipment is purchased, it will cost $1,000,000 with a bank loan of rate of 10% and has a 6-year maintenance contract that cost $25,000 at the beginning of each year. Residual value (at T = 5) = $200,000. The marginal tax rate is 40% and the equipment has a 5-year MACRS life. Using the dollar cost approach, find the Net Advantage to Leasing (NAL). Should Right Choice Imaging purchase or lease the equipment. Why?
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