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Your firm will either purchase or lease a new $500,000 packaging machine from the manufacturer. If purchased,...

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Finance

Your firm will eitherpurchase or lease a new $500,000 packaging machine from themanufacturer. If purchased, the machine will be depreciatedstraight-line over five years. You can lease the machine using atrue tax lease for $125,000 per year for five years with the firstpayment today. Assume the machine has no residual value, thesecured borrowing rate is 9%, and the tax rate is 35%. Should youbuy or lease?

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Transcribed Image Text

Your firm will eitherpurchase or lease a new $500,000 packaging machine from themanufacturer. If purchased, the machine will be depreciatedstraight-line over five years. You can lease the machine using atrue tax lease for $125,000 per year for five years with the firstpayment today. Assume the machine has no residual value, thesecured borrowing rate is 9%, and the tax rate is 35%. Should youbuy or lease?

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