QUESTION 17

1. Jim work for a chemical research laboratory that is contemplating leasing a water treatement equipment (leasing is a common practice with expensive, high-tech equipment). The equipment costs $600,000 and it would be depreciated straight-line to zero over six years. Because of water contamination, it will actually be completely valueless in six years. You can lease it for $8000 per year for five years. Assume that the tax rate is 35 percent. You can borrow at 8 percent before taxes. Should you lease or buy?
2. Thank you :)