Discuss the given question according to the requirements

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Reference no: EM131525337

Question: A. Sadik Industries must install $1 million of new machinery in its Texas plant. It can obtain a bank loan for 100 percent of the required amount. Alternatively, a Texas investment banking firm that represents a group of investors believes that it can arrange for a lease financing plan. Assume that these facts apply:

(1) The equipment falls in the MACRS 3-year class.

(2) Estimated maintenance expenses are $50,000 per year.

(3) The firm's tax rate is 34 percent.

(4) If the money is borrowed, the bank loan will be at a rate of 14 percent, amortized in 3 equal installments at the end of each year.

Reference no: EM131525337

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