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Craxton Engineering will either purchase or lease a new $747,000 fabricator. If? purchased, the fabricator will be depreciated on a? straight-line basis over seven years.

Craxton Engineering will either purchase or lease a new

$747,000

fabricator. If? purchased, the fabricator will be depreciated on a? straight-line basis over seven years. Craxton can lease the fabricator for

$132,000

per year for seven years.? Craxton's tax rate is

35%.

?(Assume the fabricator has no residual value at the end of the seven?years.)

a. What are the free cash flow consequences of buying the fabricator if the lease is a true tax? lease?

b. What are the free cash flow consequences of leasing the fabricator if the lease is a true tax? lease?

c. What are the incremental free cash flows of leasing versus? buying?

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