Question
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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