Reference no: EM132465608
Five Rivers Health System has decided to acquire a new electronic health record system for its Tertiary Hospital. Five Rivers could obtain a term loan for the full purchase price at a 8% interest rate. Five Rivers marginal tax rate is 40%.
Estimated cash flows associated with leasing and ownership are as follows:
Year 0 Year 1 Year 2 Year 3 Year 4
Leasing (45,000) (285,000) (285,000) (285,000) (240,000)
Ownership (1,545,000) 153,000 225,000 45,000 192,000
Using Net Advantage of Leasing analysis, should the system be purchased or leased? Show how you arrive at the decision?
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