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Determine llc should buy or lease the truck fleet

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Reference no: EM132902539

International Allied Distributors, LLC is evaluating whether to purchase its new truck fleet or to lease it from an identified dealer that offers both, buy or lease.

  • The alternative of leasing the truck fleet requires an annual payment of $ 2,250,000 annually for the next 5 years.
  • Buying the truck fleet requires an investment of $ 8,500,000. The company will obtain the funds through a business loan at 6% compounded annually. Purchasing the truck fleet requires a total annual maintenance cost of $ 500,000 annually.
  • The company's tax rate is 40% and its weighted average cost of capital (WACC) is 7%. You will use the straight-line depreciation method for the 5-year useful life of the truck fleet.

Problem 1: Determine if International Allied Distributors, LLC should buy or lease the truck fleet.

Reference no: EM132902539

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