Assume that Reynolds tax rate is 40 percent and the equipments depreciation would be $100 per year.

Question:

Assume that Reynolds’ tax rate is 40 percent and the equipment’s depreciation would be $100 per year. If the company leased the asset on a 2-year lease, the payment would be $110 at the beginning of each year. If Reynolds borrowed and bought, the bank would charge 10 percent interest on the loan. Should Reynolds lease or buy the equipment?

Depreciation
Depreciation is an important concept in accounting. By definition, depreciation is the wear and tear in the value of a noncurrent asset over its useful life. In simple words, depreciation is the cost of operating a noncurrent asset producing...