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Perform analysis to support the decision

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Reference no: EM131340874

This task deals with leasing scenarios.

Your company (Acme Iron) is considering leasing a new computer, you and your team need to perform analysis to support the decision making process. The lease lasts for 9 years. The lease calls for 10 payments of $10,000 per year with the first payment occurring immediately. The computer would cost $70,650 to buy and would be straight-line depreciated to a zero salvage over 9 years. The actual salvage value is negligible because of technological obsolescence. The firm can borrow at a rate of 8%. The corporate tax rate is 30%.

What is the after-tax cash flow from leasing relative to the after-tax cash flow from purchasing in years 1-9?

Reference no: EM131340874

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