Should the company buy or lease

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Assume 35% taxes. Equipment can be leased at $10,000 per year (first payment one year hence) for ten years or purchased at a cost of $64177. The company has a weighted average cost of capital of 15 percent. A bank has indicated that it would be willing to make a loan of $64,177 at a cost of 10 percent. The equipment will be used for ten years, There is zero salvage value. Please do not use Wacc. To compare we have to use the same rate as the bank)

1) Should the company buy or lease?

Reference no: EM132014423


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