Use the following data on Table 3 to decide should the Company lease or purchase the new production line. The PV of the costs of the purchase decision is $72,450. a. Must not lease the equipment because the cost of lease is $114,155 b. Must lease the equipment because the cost of lease is $69,756 C. Must lease the equipment because the cost of lease is $55,000 d. Must not lease the equipment because the cost of lease is $75,000 Table 3: Annual Payment* Tax rate Rental Period (years) Cost of Borrowing (before tax) * Payments are due at the beginning of each year $ 25,000 40% 5 9.50%

Use the following data on Table 3 to decide should the Company lease or purchase the new production line. The PV of the costs of the purchase decision is $72,450. a. Must not lease the equipment because the cost of lease is $114,155 b. Must lease the equipment because the cost of lease is $69,756 C. Must lease the equipment because the cost of lease is $55,000 d. Must not lease the equipment because the cost of lease is $75,000 Table 3: Annual Payment* Tax rate Rental Period (years) Cost of Borrowing (before tax) * Payments are due at the beginning of each year $ 25,000 40% 5 9.50%

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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