4. Assume that there is a 40% marginal tax rate. An asset with a life of...

4. Assume that there is a 40% marginal tax rate. An asset with a life of 3 years can be bought for $25,313 or leased for $10,000 per year. Funds can be borrowed at cost of 0.09 (payments of $10,000 per year).

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Expert Solution

4. Assume that there is a 40% marginal tax rate.

An asset with a life of 3 years can be bought for $25,313 or leased for $10,000 per year.

Funds can be borrowed at cost of 0.09 (payments of $10,000 per year).

We assume straight line Depreciation.

Depreciation = $25,313 / 3 = $8,437.

The Net Cash Flow for Leasing ($15,187.80) is higher than the Net Cash Flow of Purchase ($15,145.62)

jeff jeffy answered 1 year ago

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