Rework Problem 1 assuming that the scanner will be depreciated as three-year property under MACRS.
In Problem 1 Assume that the tax rate is 35 percent. You can borrow at 8 percent before taxes. Should you lease or buy?
You work for a nuclear research laboratory that is contemplating leasing a diagnostic scanner (leasing is a common practice with expensive, high-tech equipment). The scanner costs $5,200,000, and it would be depreciated straight-line to zero over four years. Because of radiation contamination, it will actually be completely valueless in four years. You can lease it for $1,525,000 per year for four years.

  • CreatedAugust 28, 2014
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