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Fairview Medical Labs needs a new ultrasound which costs $2,600,000. It plans on using it for 5 years. After 5 years, it will have a
Fairview Medical Labs needs a new ultrasound which costs $2,600,000. It plans on using it for 5 years. After 5 years, it will have a residual value of $260,000 with no tax on sale. The asset qualifies for a CCA rate of 20%. If leased, 5 annual lease payments of $520,000 payable at the beginning of the period are required. Fairview has a tax rate of 40%, a WACC rate of 12%, and its interest rate on any borrowing is 10%. Should Fairview buy or lease this machine? Show all the calculations
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