Calculate the amortization of the equivalent loan

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Question - The Student Company is considering the acquisition of a machine that costs $100,000 if bought today. The company can buy or lease the machine. If it buys the machine, the machine would be depreciated as a 3-year MACRS asset and is expected to have a sal­vage value of $5,000 at the end of the 5-year useful life. If leased, the lease payments are $25,000 each year for four years, payable at the beginning of each year. The marginal tax rate of the Student Company is 30% and the cost of capital is 15%. Assume that the lease is a net lease, that any tax benefits are realized in the year of the expense, and that there is no investment tax credit.  NPV of the lease is $12,481.79. Calculate the amortization of the equivalent loan.

Reference no: EM133089389

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