A company needs to decide whether to buy or lease new equipment. The company can buy the
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Question:
A company needs to decide whether to buy or lease new equipment. The company can buy the equipment for $1,800,000. If leased, the company will be required to pay maintenance costs annually. Consider the following:
Present Value of Lease Payments Before-tax = $1,100,000;
Present Value of Lease Payments Tax Shield = $220,000;
PVCCATS = $350,000;
Present Value of Salvage Value = $400,000;
Present Value of Annual Maintenance Costs After-tax = $3,000.
Assume you were computing the NAL for the company. What amount would you use in your analysis for the present value of leasing?
Related Book For
Managerial Accounting
ISBN: 9780073526706
12th Edition
Authors: Ray H. Garrison, Eric W. Noreen, Peter C. Brewer
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