You are trying to decide, whether to lease or to buy equipment. The lease lasts for 5 years, with $2,000 annual payments due at the end of each year. The company can borrow at 10% and has a 30% marginal tax rate. The NPV of the cost of buying the equipment is $5,100. What is the company's net advantage of leasing this equipment (in $), approximately? O a. 640 O b. 340 O c. -340 O d. 460 e. -640 O f. -460

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter19: Lease And Intermediate-term Financing
Section: Chapter Questions
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You are trying to decide, whether to lease or to buy equipment. The lease lasts for 5
years, with $2,000 annual payments due at the end of each year. The company can
borrow at 10% and has a 30% marginal tax rate. The NPV of the cost of buying the
equipment is $5,100. What is the company's net advantage of leasing this equipment
(in $), approximately?
O a. 640
O b. 340
O c. -340
O d. 460
e. -640
O f.
-460
Transcribed Image Text:You are trying to decide, whether to lease or to buy equipment. The lease lasts for 5 years, with $2,000 annual payments due at the end of each year. The company can borrow at 10% and has a 30% marginal tax rate. The NPV of the cost of buying the equipment is $5,100. What is the company's net advantage of leasing this equipment (in $), approximately? O a. 640 O b. 340 O c. -340 O d. 460 e. -640 O f. -460
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