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Which way would finance the truck

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Question: You have decided to acquire a truck costing $ 10,000. You are offered a 4-year lease of $2,800 per year payable at the beginning of each year, or a term loan of $ 10,000 with equal payments at the end of each year. The benefits of any tax shields are realized at the end of each year. The interest rate on the loan is 11 percent. The rate for capital cost allowances is 30 percent. At the end of 4 years the truck has no salvage value, and the tax rate is 40 percent. Which way would you finance the truck?

Reference no: EM131750575

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