Calculate the cost of leasing the equipment

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Reference no: EM131010574

Andiola Corporation is evaluating whether to lease or purchase equipment. Its tax rate is 30 percent. If the company purchases the equipment for $1,500,000 it will depreciate it over 5 years, using straight-line depreciation. If the company enters into a 5-year lease, the lease payment is $350,000 per year, payable at the beginning of each year. If the company purchases the equipment it will borrow from its bank at an interest rate of 10 percent.

a. Calculate the cost of purchasing the equipment.

b. Calculate the cost of leasing the equipment.

c. Calculate the net advantage to leasing. Should the company purchase or lease the equipment?

Reference no: EM131010574

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Calculate the cost of leasing the equipment : Andiola Corporation is evaluating whether to lease or purchase equipment. Its tax rate is 30 percent. If the company purchases the equipment for $1,500,000 it will depreciate it over 5 years, using straight-line depreciation. Calculate the cost of pu..

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