Considering either leasing or buying some new farm equipment

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Green Valley Farms is considering either leasing or buying some new farm equipment. The lessor will charge $19,000 a year lease. The purchase price is $56,000. The equipment has a 3-year life after which time it will be worthless. Green Valley Farms uses straight-line depreciation, has a 32 percent tax rate, borrows money at 7 percent, and has sufficient tax loss carryovers to offset any potential taxable income the firm might have over the next five years. What is the net advantage to leasing?

Reference no: EM13945370

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