Use the following data on Table 3 to decide should the Company lease or purchase the new production line. The PV of the costs of the purchase decision is $72,450. a. Must not lease the equipment because the cost of lease is $114,155 b. Must lease the equipment because the cost of lease is $69,756 C. Must lease the equipment because the cost of lease is $55,000 d. Must not lease the equipment because the cost of lease is $75,000 Table 3: Annual Payment* Tax rate Rental Period (years) Cost of Borrowing (before tax) * Payments are due at the beginning of each year $ 25,000 40% 5 9.50%

Use the following data on Table 3 to decide should the Company lease or purchase the new production line. The PV of the costs of the purchase decision is $72,450. a. Must not lease the equipment because the cost of lease is $114,155 b. Must lease the equipment because the cost of lease is $69,756 C. Must lease the equipment because the cost of lease is $55,000 d. Must not lease the equipment because the cost of lease is $75,000 Table 3: Annual Payment* Tax rate Rental Period (years) Cost of Borrowing (before tax) * Payments are due at the beginning of each year $ 25,000 40% 5 9.50%

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter19: Lease Financing

Section: Chapter Questions

Problem 1P: Reynolds Construction (RC) needs a piece of equipment that costs 200. RC can either lease the...

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Question1: Petra Corporation owns equipment with a book value of $170,000. The equipment's fair value less costs to sell is $140,000, and its value-in-use is $135,000. Petra should recognize a loss on impairment of v a. $0,000. b. $5,000. c. $35,000. d. $30,000 Question 2: one of the following is a definition of asset: a- a present economic resource controlled by the entity as a result of a past event b- a present economic resource owned by the entity as a result of a future event C- a present economic resource owned by the entity as a result of a past event d- a present economic resource controlled by the entity as a result of a future event A Mouing to onothe 37°C Haze DELL PrtScr Insert Delete F10 F11 F12 F8 F9 F5 F6 F7
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