Solution-Evaluating a potential lease agreement

Evaluating a potential lease agreement

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Reference no: EM13667688

Walton Publishing Company (WPC) is evaluating a potential lease agreement on a printing press that costs $250,000 and falls into the MACRS 3-year class. The firm can borrow at an 8 percent rate on a 4-year amortized loan, if WPC decides to borrow and buy rather than lease. The press has a 4-year economic life, and its estimated residual value is $25,000 at the end of year 4. If WPC buys the press, it would purchase a maintenance contract that costs $5,000 per year, payable at the beginning of each year. The lease terms which include maintenance call for a $71,000 lease payment at the beginning of each year. WPC's tax rate is 40 percent. Should the firm lease or buy?

Reference no: EM13667688

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Evaluating a potential lease agreement

Reference no: EM13667688

Reference no: EM13667688

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