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Calculate the cost of purchasing the equipment

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Andiola Corporation is evaluating whether to lease or purchase equipment. Its tax rate is 30 percent. The purchase price is $1.2 million, required modications to the equipment will cost $50,000. The company would depreciate the equipment over 4 years, using straight-line depreciation. A 4-year lease calls for a payment of $350,000 at the beginning of each year. If the equipment is purchased, the company will borrow from its bank at an interest rate of 10 percent.

Required:

a. Calculate the cost of purchasing the equipment.

Reference no: EM131213905

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