Equipment can be leased, Assuming 0% taxes. Equipment can

Equipment can be leased

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Reference no: EM131567788

Assuming 0% taxes. Equipment can be leased at $12,000 per year (first payment at the end of year) for nine years or purchased at a cost of $68,000. The company has a weighted average cost of capital of 12%. A bank has indicated that it would be willing to make the loan of $68,000 at a cost of 10%. There is no salvage value. Should the company buy or lease?

A. None of them

B. Buy; PV of Buy option lower than Lease option

C. Buy; PV of Lease option lower than Buy option

D. Lease; PV of Lease option lower than Buy option

E. Lease; PV of Buy option lower than Lease option

Reference no: EM131567788

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