The Deacon Co. is a pharmaceutical firm that has decided to acquire a new line of centrifuges to improve its production process. They are now trying to determine whether to purchase or lease the centrifuges. These machines cost $48,000 and have a useful operating life of four years. If they purchase the centrifuges they will be depreciated over their four-year life by the straight-line method. The Deacon Co. pays taxes at a rate of 21% under the TCJA and their before tax borrowing cost is 6%. Based on this information what is the breakeven lease payment below which it is economical for The Deacon Co. to lease the centrifuges? O $13,841.65 O $13,454.91 $12,688.18 O $14.995.13 O $10,934.91
The Deacon Co. is a pharmaceutical firm that has decided to acquire a new line of centrifuges to improve its production process. They are now trying to determine whether to purchase or lease the centrifuges. These machines cost $48,000 and have a useful operating life of four years. If they purchase the centrifuges they will be depreciated over their four-year life by the straight-line method. The Deacon Co. pays taxes at a rate of 21% under the TCJA and their before tax borrowing cost is 6%. Based on this information what is the breakeven lease payment below which it is economical for The Deacon Co. to lease the centrifuges? O $13,841.65 O $13,454.91 $12,688.18 O $14.995.13 O $10,934.91
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
Related questions
Question
![The Deacon Co. is a pharmaceutical firm that has decided to acquire a new line of centrifuges to improve its production
process. They are now trying to determine whether to purchase or lease the centrifuges. These machines cost $48,000 and
have a useful operating life of four years. If they purchase the centrifuges they will be depreciated over their four-year life by
the straight-line method. The Deacon Co. pays taxes at a rate of 21% under the TCJA and their before tax borrowing cost is
6%. Based on this information what is the breakeven lease payment below which it is economical for The Deacon Co. to lease
the centrifuges?
O $13,841.65
O$13,454.91
O $12,688.18
$14,995.13
$10,934.91](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F01059321-62f7-4d81-8da7-5743afd0d69c%2F59fbf47e-4aa6-44ad-89ed-f14e054194ba%2Fip3qiua_processed.jpeg&w=3840&q=75)
Transcribed Image Text:The Deacon Co. is a pharmaceutical firm that has decided to acquire a new line of centrifuges to improve its production
process. They are now trying to determine whether to purchase or lease the centrifuges. These machines cost $48,000 and
have a useful operating life of four years. If they purchase the centrifuges they will be depreciated over their four-year life by
the straight-line method. The Deacon Co. pays taxes at a rate of 21% under the TCJA and their before tax borrowing cost is
6%. Based on this information what is the breakeven lease payment below which it is economical for The Deacon Co. to lease
the centrifuges?
O $13,841.65
O$13,454.91
O $12,688.18
$14,995.13
$10,934.91
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps with 1 images
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Recommended textbooks for you
![Essentials Of Investments](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781260013924/9781260013924_smallCoverImage.jpg)
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
![FUNDAMENTALS OF CORPORATE FINANCE](https://www.bartleby.com/isbn_cover_images/9781260013962/9781260013962_smallCoverImage.gif)
![Financial Management: Theory & Practice](https://www.bartleby.com/isbn_cover_images/9781337909730/9781337909730_smallCoverImage.gif)
![Essentials Of Investments](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781260013924/9781260013924_smallCoverImage.jpg)
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
![FUNDAMENTALS OF CORPORATE FINANCE](https://www.bartleby.com/isbn_cover_images/9781260013962/9781260013962_smallCoverImage.gif)
![Financial Management: Theory & Practice](https://www.bartleby.com/isbn_cover_images/9781337909730/9781337909730_smallCoverImage.gif)
![Foundations Of Finance](https://www.bartleby.com/isbn_cover_images/9780134897264/9780134897264_smallCoverImage.gif)
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
![Fundamentals of Financial Management (MindTap Cou…](https://www.bartleby.com/isbn_cover_images/9781337395250/9781337395250_smallCoverImage.gif)
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
![Corporate Finance (The Mcgraw-hill/Irwin Series i…](https://www.bartleby.com/isbn_cover_images/9780077861759/9780077861759_smallCoverImage.gif)
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education