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BiliBala Inc. needs some new equipment. Now the company can choose to either lease or purchase the equipment. The purchase price is $80,000. The equipment has a 5-year life after which time it will be sold at $10,000. The company could borrow money at 6%, and faces a 35% tax rate. The equipment can be depreciated at a CCA rate of 30%. For leasing, the manufactory will charge a pre-tax lease fee of $15,000 per year. What is the net advantage to leasing? O $4,760

BiliBala Inc. needs some new equipment. Now the company can choose to either lease or purchase the equipment. The purchase price is $80,000. The equipment has a 5-year life after which time it will be sold at $10,000. The company could borrow money at 6%, and faces a 35% tax rate. The equipment can be depreciated at a CCA rate of 30%. For leasing, the manufactory will charge a pre-tax lease fee of $15,000 per year. What is the net advantage to leasing? O $4,760

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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BiliBala Inc. needs some new equipment. Now the company can choose to either lease or purchase the equipment. The purchase price is $80,000. The equipment has a 5-year life after which time it will be sold at $10,000. The company could borrow money at 6%, and faces a 35% tax rate. The equipment can be depreciated at a CCA rate of 30%. For leasing, the manufactory will charge a pre-tax lease fee of $15,000 per year. What is the net advantage to leasing? $4,760 $6,458 $2,000 $13,019
Transcribed Image Text:BiliBala Inc. needs some new equipment. Now the company can choose to either lease or purchase the equipment. The purchase price is $80,000. The equipment has a 5-year life after which time it will be sold at $10,000. The company could borrow money at 6%, and faces a 35% tax rate. The equipment can be depreciated at a CCA rate of 30%. For leasing, the manufactory will charge a pre-tax lease fee of $15,000 per year. What is the net advantage to leasing? $4,760 $6,458 $2,000 $13,019
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