DirectJet is evaluating a lease agreement for an aircraft push truck that costs $150,000 and falls into

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DirectJet is evaluating a lease agreement for an aircraft push truck that costs $150,000 and falls into the MACRS five-year class. DirectJet is in a 35 percent tax bracket, and can borrow the money at 8 percent and amortize the loan over the six-year period if it decides to buy rather than lease. The loan payments would be made at the end of the year. The truck has a six-year economic life and its estimated residual value is $70,000. If DirectJet were to buy the push truck, it would purchase a maintenance contract that costs $3,500 per year, payable at the end of each year. The lease terms, which include maintenance, call for a $35,000 lease payment at the beginning of each year. Should DirectJet buy or lease?

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Foundations Of Airline Finance

ISBN: 9780415743259

2nd Edition

Authors: Bijan Vasigh, Kenneth Fleming, And Barry Humphreys

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