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How much larger or smaller is the bank loan payment

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Problem - Hills Co. must purchase $5,500,000 worth of service equipment and is weighing the merits of leasing the equipment or purchasing. The company has a zero-tax rate due to tax loss carry-forwards, and is considering a 5-year, bank loan to finance the equipment. The loan has an interest rate of 8% and would be amortized over 5 years, with 5 end-of-year payments. Hills can also lease the equipment for 5 end-of-year payments of $1,590,000 each. How much larger or smaller is the bank loan payment than the lease payment?

Reference no: EM132982950

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