A company needs to decide whether to buy or lease new equipment. The equipment can...
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Accounting
A company needs to decide whether to buy or lease new equipment. The equipment can be purchased for $400,000 or leased at an annual cost of $150,000. The equipment qualifies for a 30% CCA rate and has an expected life of 3 years. Salvage value is expected to be zero. The company's after-tax cost of debt is 7% and its tax rate is 15%. Lease payments would be due at the beginning of each year. Taxes are paid at the end of each year. What is the present value of the lease payments tax shield?
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