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Carmichael Cleaners needs a new steam finishing machine that costs $100,000. The company is evaluating whether it should lease or purchase the machine. The equipment

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Carmichael Cleaners needs a new steam finishing machine that costs $100,000. The company is evaluating whether it should lease or purchase the machine. The equipment falls into the MACRS 3 year class and it would be used for 3 years and then sold, because the firm plans to move to a new facility at that time. The estimated value of the equipment for 3 years 530,000 Amantenance contract on the equipment would cost $3.000 per year, payable at the beginning of each year Alternatively, the firm could lease the equipment for 3 years for a lease payment of 529.000 per year, payable at the beginning of each year. The lease would include maintenance. The form is in the 20% tax bracket and it could obtain a 3-year simple interest an interest payable at the end of the year to purchase the equipmental before-tax cost of 10 If there is a positive Net Advantage to Leasing the fem will lease the equipment Otherwise, will buy itWhat is the NL (Note: Assume MACRS rates for years tore 03330.000 1001 and 0071 36 334 56640 56972 Carmichael Cleaners needs a new steam finishing machine that costs $100.000. The company is evaluating whether should be or purchase the machine. The equipment falls into the MACRS 3.carclass, and it would be used for 3 years and then sold, because the firm plans to move to a new facility at that time. The estimated value of the equipment after years 530.000 A maintenance contract on the equipment would cost $3.000 per year, payable at the beginning of each year. Alternatively, the firm could lose the equipment for 3 years for a lase payment of 20000 per year, payable at the beginning of each year. The lease would include mantenance. The firm is in the 20% tax bracket and it could obtain a 3-year me interent loan rest payable at the end of the year to purchase the equipment of a before tax cost of 10 if there is a positive Net Advantage to Leasing the firm willease the equipment Otherwise, it will buy it WNAL? (Note: Assume MACRS rates for Years 1 to 4 0333044501081 and 007) 55734 05.09 55324 5664 56 572

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