Transport fans to future games

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The Hawkeye Charter Inc., (HCI) has decided to acquire a new bus to transport fans to future games away from Iowa City. One alternative is to lease the bus from the manufacturer on a 3-year contract for a lease payment of $12,000 per year payable at the beginning of the year. The lease agreement would include maintenance. Alternatively, HCI could purchase the bus outright for $45,000, financing the purchase by a bank loan for the net purchase price and amortizing the loan over a 3-year period at an interest rate of 10% per year. If purchased, HCI would have to maintain the bust at a cost of $10,000 after 3 years. HCI has a tax rate of 40% Should HCI buy or lease the Bus?

Reference no: EM131478508

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