In considering leasing versus buying decisions , adopting a new machines saves annual operation cost by...

In considering leasing versus buying decisions , adopting a new machines saves annual operation cost by $5,000 if cost of debt is 8%, corporate tax is 40%, Then tha after tax operating saving is $________(please enter whole number without comma)

Expert Solution

$5000 is the operation saving. If 8% cost of debt is applied, then the interest expense = 8%*5000=$400

On this tax is deductible at 40% rate which is a saving of 40% * 400 = $160.

So after tax saving comes to 5000+160=$5160

jeff jeffy answered 2 years ago

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