Compare the option of buying and leasing to help the company

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The Misthosi Company is considering the acquisition of a machine that costs of $50,000 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 $1,000 at the end of the 5-year useful life. If leased, the lease payments are $12,000 each year for four years, payable at the beginning of each year. The tax rate of Mishthosi is 30% and its cost of capital is 10%. Compare the option of buying and leasing to help the company decide which alternative they should choose.

Reference no: EM131067039

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