Question
metro made a decision to obtain a new material at a cost of 690,000. The material has a life of six years and will be
metro made a decision to obtain a new material at a cost of 690,000. The material has a life of six years and will be depreciated using 5-year MACRS with rates of .20, .32, .192, .1152, .1152, and .0576 (note that 5-year MACRS depreciation actually takes place over 6 years). There is no actual salvage value.Andover Lease has offered to lease the material to metro for 141,000 a year for six years, with lease payment at the end of each year. Metro has a cost of equity of 9.5 %, a pre-tax cost of debt of 5%, and a marginal tax rate of 25 %. Should Metro lease or purchase?
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