Dunbar Corporation can purchase an asset for $21,000; the asset will be worthless after 13 years. Alternatively, it could lease the asset for 13 years with an annual lease payment of $2,113 paid at the end of each year. The firm’s cost of debt is 7%. The IRS classifies the lease as a non-tax-oriented lease. What is the net advantage to leasing? Enter your answer as a positive value. Do not round intermediate calculations.

Dunbar Corporation can purchase an asset for $21,000; the asset will be worthless after 13 years. Alternatively, it could lease the asset for 13 years with an annual lease payment of $2,113 paid at the end of each year. The firm’s cost of debt is 7%. The IRS classifies the lease as a non-tax-oriented lease. What is the net advantage to leasing? Enter your answer as a positive value. Do not round intermediate calculations.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 1P

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