The A Company has decided to acquire a piece of equipment but has not yet decided to buy or lease. The lease payments would be $140,105 paid annually at the end of each year. If purchased at a cost of $400,000, the equipment would be financed with debt costing 0.10, which can be repaid at any time within the four-year period. The life of the equipment is four years. The lease is a firm commitment to make four payments. There is no salvage value. Should the firm lease or buy-borrow? There are no taxes.
The A Company has decided to acquire a piece of equipment but has not yet decided to buy or lease. The lease payments would be $140,105 paid annually at the end of each year. If purchased at a cost of $400,000, the equipment would be financed with debt costing 0.10, which can be repaid at any time within the four-year period. The life of the equipment is four years. The lease is a firm commitment to make four payments. There is no salvage value. Should the firm lease or buy-borrow? There are no taxes.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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- The A Company has decided to acquire a piece of equipment but has not yet decided to buy or lease. The lease payments would be $140,105 paid annually at the end of each year. If purchased at a cost of $400,000, the equipment would be financed with debt costing 0.10, which can be repaid at any time within the four-year period. The life of the equipment is four years. The lease is a firm commitment to make four payments. There is no salvage value. Should the firm lease or buy-borrow? There are no taxes.
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