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The firm is considering either leasing or buying new $19,000 equipment. The lessor will charge $12,000 a year for a two-year lease. The equipment has
The firm is considering either leasing or buying new $19,000 equipment. The lessor will charge $12,000 a year for a two-year lease. The equipment has a two-year life after which time it is expected to have a zero resale value. The firm uses straight-line depreciation, borrows money at 7% pre-tax, and has a tax rate of 21%. What is the net advantage to leasing? A) $1254 B) $720 C) $167 D) $319 E) $720
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