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Medarex is considering the lease of an electronic welder costing $210,000 from Key Leasing. The period of the lease will be 6 years. The welder
Medarex is considering the lease of an electronic welder costing $210,000 from Key Leasing. The period of the lease will be 6 years. The welder will be depreciated under MACRS rules for a 5-year class asset. Medarex's marginal tax rate is 40%. Annual beginning-of-the-year lease payments will be $50,000. Estimated salvage value is zero. Assuming Medarex's after-tax cost of borrowing is 15%, compute the net advantage to leasing. (Problem requires MACRS
tables.)
Question 4Answer
a.
$17,592
b.
$8,527
c.
$67,174
d.
$21,427
e.
$65,572
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