A company is faced with the decision of whether to lease or purchase new equipment. The equipment can be leased at an annual cost of $210,000 or purchased for $560,000. The equipment has an expected life of 3 years and qualifies for a 30% CCA rate. Salvage value is expected to be zero. The company's tax rate is 20% and its after-tax cost of debt is 4.5%. Assume taxes are paid at the end of each year while lease payments would be due at the beginning of each year. What is the present value of the lost CCA tax shield?

Answer rating: 100% (QA)

To calculate the present value of the lost CCA tax shield we need to consider the tax benefits from ... View the full answer