JITA company wants to invest $ 1 , 0 0 0 , 0 0 0 in equipment,
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Question:
JITA company wants to invest $ in equipment, but wishes to assess whether leasing is worthwhile. JITA Operators are very hard on their equipment such that they are worn out and have no residual value at the end of ten years. DABA Leasing Limited has offered to lease the equipment over a tenyear term for $ per year. The company may also borrow the necessary funds using a tenyear term loan with an interest rate of Ignore the issue of insurance, maintenance, and other costs of ownership. If JITA buys the equipment outright, they will be able to claim CCA each year at and obtain a corresponding tax shield of Assume a discount rate of
Required:
a Should the company lease or buy the asset?
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