Waterdown Industries is contemplating the acquisition of some new equipment. The purchase price is $40,000....
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Waterdown Industries is contemplating the acquisition of some new equipment. The purchase price is $40,000. The equipment has a 4-year life after which time it will be worthless. The equipment belongs in a 35 percent CCA class. The equipment can be leased for $12,000 a year. The firm can borrow money at 7 percent and has a 35 percent tax rate. What is the incremental annual cash flow for year 2 if the company decides to lease the equipment rather than purchase it?
a. -$11,843
b. -$11,193
c. $928
d. $2,916
e. -$4,778
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