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In considering leasing versus buying decisions, if cost of debt is 8%, corporate tax is 40%,...

In considering leasing versus buying decisions, if cost of debt is 8%, corporate tax is 40%, What discout rate shall we use?

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Expert Solution

Cost of debt = 8%

Corporate tax = 40%

Discount rate for considering leasing versus buying decisions = Cost of debt * (1 - Corporate tax)

= 8% * (1 - 40%)

= 4.8%

Therefore, discount rate to be considered for leasing versus buying decisions is 4.8%

jeff jeffy answered 2 years ago
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