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Tommy is the financial manager of Tree Corporation. He has been asked to conduct a lease-versus-purchase...

Tommy is the financial manager of Tree Corporation. He has been asked to conduct a lease-versus-purchase analysis on a new molding machine. THe machine costs $360,000 and will be depreciated by the straight line method over 5 years with zero residual value.

Alternatively, the company can lease the machine with year-end payments of $95,000 over 5 years from Apple Finance. The company's tax rate is 35% and its before-tax costs of borrowing is 10%.

Should the company lease or purchase the machine? Support your answer with detail computations.

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jeff jeffy answered 2 years ago
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