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Red Shirt Inc. has determined to acquire a new piece of equipment and must determine whether to lease or buy the item. The machine costs
Red Shirt Inc. has determined to acquire a new piece of equipment and must determine whether to lease or buy the item. The machine costs $ and has a useful operating life of four years, after that time the equipment will have no salvage value. The machine will be depreciated by the straightline method over this fouryear life. Red Shirt can borrow at before taxes and operates in a marginal tax bracket. What is the breakeven lease payment that would make Red Shirt indifferent between leasing and buying?
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