{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Hint use techniques presented in chapter 4 to find

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: cipal paid for each year. (Hint: Use techniques presented in Chapter 4 to find the loan payment.) LG2 16–4 Lease versus purchase JLB Corporation is attempting to determine whether to lease or purchase research equipment. The firm is in the 40% tax bracket, and its after-tax cost of debt is currently 8%. The terms of the lease and of the purchase are as follows: Lease Annual end-of-year lease payments of $25,200 are required over the 3year life of the lease. All maintenance costs will be paid by the lessor; insurance and other costs will be borne by the lessee. The lessee will exercise its option to purchase the asset for $5,000 at termination of the lease. Purchase The research equipment, costing $60,000, can be financed entirely with a 14% loan requiring annual end-of-year payments of $25,844 for 3 years. The firm in this case will depreciate the equipment under MACRS using a 3year recovery period. (See Table 3.2 on page 100 for the applicable depreciation percentages.) The firm will pay $1,800 per year for a service contract that covers all maintenance costs; insurance and other costs...
View Full Document

{[ snackBarMessage ]}

Ask a homework question - tutors are online