Assuming 0% taxes. Equipment can be leased at $18000 per year (first payment at beginning of year) for eight years or purchased at a cost of $100000. The company has a weighted average cost of capital of 11%. A bank has indicated that it would be willing to make the loan of $100000 at a cost of 10%. There is no salvage value.

Should the company buy or lease?

Answer rating: 100% (QA)

To determine whether the company should buy or lease the equipment we need to compare the present va... View the full answer