Question

MLC, Inc. plans to either lease or buy equipment. The equipment has a 3-year life with no salvage expected. The company will depreciate on a straight-line basis over 3 years. The company can borrow the $6 million purchase price at 10% to buy the equipment or make 3 equal end-of-year lease payments of $2.5 million each to lease it. The company's tax rate is 30%. What is the cost of purchasing the equipment?
1. $4,200,000
2. $4,031,763
3. $4,425,410
4. $4,507,889
5. None of the above



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  • CreatedAugust 05, 2013
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