Your company is considering purchasing a fleet of cars for $195,000. It can borrow at 8.5%. The
Question:
Your company is considering purchasing a fleet of cars for $195,000. It can borrow at 8.5%. The cars will be used for four years. At the end of 4 years they will be worthless. You called a leasing agent and found that the cars can be leased for $55,000 per year with lease payments at the end of the year. The corporate tax rate is 34%. Using straight-line depreciation for 4 years, what is the net advantage to leasing? Should you lease or purchase?
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