Lease vs Buy Pt 3
Fran’s Business has two options:
(A) lease a $60,000 machine over a five-year period with an annual lease payment of $14,000;
(B) borrow $60,000 from the bank over the five-year period to buy the asset. The bank would charge a 9% interest.
Other financial assumptions are:
(a) the company’s income tax rate is 30%;
(b) the capital cost allowance for the equipment is an even $12,000 per year;
(c) the equipment has no residual value.
What is the annual after-tax lease payment (a negative number)?
Lease vs Buy Pt 4
Fran’s Business has two options:
(A) lease a $60,000 machine over a five-year period with an annual lease payment of $14,000;
(B) borrow $60,000 from the bank over the five-year period to buy the asset. The bank would charge a 9% interest.
Other financial assumptions are:
(a) the company’s income tax rate is 30%;
(b) the capital cost allowance for the equipment is an even $12,000 per year;
(c) the equipment has no residual value.
What is the annual before-tax loan payment (a negative number)?
Lease vs Buy Pt 5
Fran’s Business has two options:
(A) lease a $60,000 machine over a five-year period with an annual lease payment of $14,000;
(B) borrow $60,000 from the bank over the five-year period to buy the asset. The bank would charge a 9% interest.
Other financial assumptions are:
(a) the company’s income tax rate is 30%;
(b) the capital cost allowance for the equipment is an even $12,000 per year;
(c) the equipment has no residual value.
What is the total NPV of the financing option (a negative number)?