Sunnyfield Industries will lease a new rock crusher for $30,000 per year for 5 years, paid at
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Sunnyfield Industries will lease a new rock crusher for $30,000 per year for 5 years, paid at the end of each year. These lease terms are consistent with an annual interest rate of 6%. How will the lease affect Sunnyfield’s EBIT and net income in the first year if the lease is classified as
(a) an operating lease, or
(b) a finance lease? Assume Sunnyfield’s tax rate is 20% and use straight-line depreciation.
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