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LEASING You are evaluating a capital lease that offers annual payments of $ 2 5 , 0 0 0 for five years. Lease rental payments
LEASING
You are evaluating a capital lease that offers annual payments of $ for five years. Lease rental
payments are to be made at the end of each year. Under this lease you are responsible for maintenance
at $ per year and annual insurance expense of $ Annual payments for maintenance and
insurance are also to be made at the end of the year. At the end of the primary lease period, you can
purchase the asset for $
Alternatively, you can obtain a $ five year loan to purchase the asset. The asset will be
depreciated using straightline method over its years useful life with zero salvage value. Being the
owner of the asset, you are also responsible for the annual maintenance and insurance expense refer to
the amount and payment type as in the lease option
If you must pay for this loan, taxes are and the discount rate is which option should
you choose?
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