Bing Corporation can buy a car for business use for $45,000 (including tax, license, and title fees)

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Bing Corporation can buy a car for business use for $45,000 (including tax, license, and title fees) or it can lease an identical car for $450 per month, paying

$2,100 up front for tax, license, and title fees.The corporation normally keeps its cars for three years and, if the car has been purchased, expects that it will be able to sell the car at the end of three years for $18,000.The corporation is in the 35 percent tax bracket and uses a 6 percent discount rate for evaluation purposes.

(For simplicity, the monthly rental fees are assumed to be paid at the end of years 1, 2, and 3.) Should Bing purchase or lease the automobile? Prepare a schedule showing your calculations to support your recommendation.

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Taxation For Decision Makers 2008

ISBN: 9780324654110

2nd Edition

Authors: Shirley Dennis-Escoffier, Karen A. Fortin

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