Sanders Limited is considering whether to lease its equipment as an alternative to borrowing to purchase it. The equipment will cost $170,000. This amount can be borrowed from a local bank at 6% interest with annual payments amortized over 4 years. Payments would be at the end of the year. The CCA rate on this equipment would be 30%, and the expected salvage at the end of 4 years is $25,000. Alternatively, lease payments of $48,000 could be made each year for 4 years, with the first payment due immediately. Sanders? cost of capital is 11%, and its tax rate is 30%. Required: Should Sanders lease or borrow to purchase?
Paper#3980 | Written in 18-Jul-2015Price : $25