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Big Co is considering leasing the new equipment that it requires, for $154,000 a year, payable in advance. The cost of the equipment is $890,000,
Big Co is considering leasing the new equipment that it requires, for $154,000 a year, payable in advance. The cost of the equipment is $890,000, has a CCA rate of 25% and will last for 6 years. The expected scrap value is $148,000. Assume that the first CCA tax deduction would be taken at the end of the first year. Big Co has lots of other equipment in this asset pool. The tax rate is 35% and the cost of debt is 9%. a. Should BigCo lease or buy the equipment? Big Co should (Click to select) the equipment. b. What is the maximum lease payment that would make Big Co indifferent between leasing or buying? (Round your answer to 4 decimal places.) The maximum lease payment $
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