1.You work for a private hospital laboratory that is contemplating leasing a multi-layers body scanner (leasing is...
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Question:
1.You work for a private hospital laboratory that is contemplating leasing a multi-layers body scanner (leasing is a very common practice with expensive, high-tech equipment). The scanner costs $5,800,000, 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 $1,740,000 per year for four years.
a.Assume that the tax rate is 35 percent. You can borrow at 8 percent before taxes. Should you lease or buy the scanner?
b.What are the cash flow from the lease from the lessor's viewpoint? Assume a 35 percent tax bracket.
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