Assume the company faces an average tax rate

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Reference no: EM132041104

HHA Corporation is trying to decide whether to borrow and purchase research equipment. If it leases the equipment, it will have beginning of year payments of $93,500 every year for 3 years. The lessor will incur all maintenance costs. If it borrows to purchase, the firm is faced with a 10% non-amortized loan over the 3-year period. The equipment costs $250,000 and is in the MACRS-3 class. Maintenance costs on the equipment are $5,000 each year. If it buys the equipment, HHA expects it to have a residual value of $45,000. Should HHA lease the asset or borrow and purchase it? Assume the company faces an average tax rate of 40%.

Reference no: EM132041104

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