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
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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
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
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