Use the spreadsheet model to rework Parts a and b of Problem 20-8. Then answer the following

Question:

Use the spreadsheet model to rework Parts a and b of Problem 20-8.
Then answer the following question.
In problem 20-8 a and b parts
a. Should the loom be leased or purchased?
b. The is clearly the most uncertain cash flow in the analysis. Assume that the appropriate pretax is 15%. What would be the effect of a risk adjustment on the decision?
c. Accepting that the corporate WACC should be used equally to discount all anticipated cash flows, at what would the firm be indifferent between leasing and buying?
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