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Your company is considering leasing an expensive piece of equipment, which costs $9,100,000, and it would be depreciated straight-line to zero over 5 years, after
Your company is considering leasing an expensive piece of equipment, which costs $9,100,000, and it would be depreciated straight-line to zero over 5 years, after that it will be worthless. Your company is debating to lease or buy. The lease expense would be $2,457,000 per year for 5 years. The corporate tax rate is 30% . Firm's riskless borrowing rate is 13% before taxes. What is annual depreciation tax shield $ ; what is aftertax lease payment $ ; what is discount rate for this lease choice question.
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To calculate the annual depreciation tax shield we can use the formula Annual depreciation tax shield Depreciation expense x Tax rate Since the equipm...
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Management and Cost Accounting
Authors: Colin Drury
8th edition
978-1408041802, 1408041804, 978-1408048566, 1408048566, 978-1408093887
