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Company A is considering either leasing or purchasing equipment valued at $100. If they lease, the annual payment to lease will be $22 per year
Company A is considering either leasing or purchasing equipment valued at $100. If they lease, the annual payment to lease will be $22 per year for 5 years. If purchased, the equipment will depreciate on a straight line over 5 years, after which it will worth 0. Company A's borrowing cost is 5%, the tax rate is 20%.
Would you recommend that they lease or buy?
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