a. What are the cash flow consequences of leasing instead of buying? b. Explain why the $10,000

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a. What are the cash flow consequences of leasing instead of buying?

b. Explain why the $10,000 in Table 26.2 has a positive sign.

Table 26.2

Lease versus Buy Aftertax lease payment Lost depreciation tax shield Cost of machine Total cash flow Year 0

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Fundamentals Of Corporate Finance

ISBN: 9780072553079

6th Edition

Authors: Stephen A. Ross, Randolph Westerfield, Bradford D. Jordan

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Question Posted: Oct 05, 2023 07:37 AM

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a. What are the cash flow consequences of leasing instead of buying? b. Explain why the $10,000

Question:

Lease versus Buy Aftertax lease payment Lost depreciation tax shield Cost of machine Total cash flow Year 0 +$10,000 Year 1 -$1,650 680 Year 2 - $1,650 680 +$10,000 -$2,330 -$2,330 Year 3 -$1,650 680 Year 4 -$1,650 - $1,650 Year 5 680 680 -$2,330 -$2,330 -$2,330

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a Cash Flow Consequences of Leasing instead of Buying Leasing poses two significant effects on cas...View the full answer

Fundamentals Of Corporate Finance

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