Dunbar Corporation can either purchase an asset for $38,000, which will have no value after 13 years, or lease the same for 13 years with an annual lease payment of $4,458, due at the end of each year. The company's cost of debt is 8%. The IRS classifies the lease as a non-tax- oriented lease. What is the net advantage of leasing? Enter your answer as a positive value. Do not round intermediate calculations. Round your answer to the nearest cent.

Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter20: Accounting For Leases
Section: Chapter Questions
Problem 10GI: Owens Company leased equipment for 4 years at 50,000 a year with an option to renew the lease for 6...
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Dunbar Corporation can either purchase an asset for
$38,000, which will have no value after 13 years, or lease
the same for 13 years with an annual lease payment of
$4,458, due at the end of each year. The company's cost
of debt is 8%. The IRS classifies the lease as a non-tax-
oriented lease. What is the net advantage of leasing? Enter
your answer as a positive value. Do not round intermediate
calculations. Round your answer to the nearest cent.
Transcribed Image Text:Dunbar Corporation can either purchase an asset for $38,000, which will have no value after 13 years, or lease the same for 13 years with an annual lease payment of $4,458, due at the end of each year. The company's cost of debt is 8%. The IRS classifies the lease as a non-tax- oriented lease. What is the net advantage of leasing? Enter your answer as a positive value. Do not round intermediate calculations. Round your answer to the nearest cent.
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