Should fresno lease the machine of buy

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Point 1: Fresno Machine Shop management has decided to acquire a newmachine that costs $3,000. The machine will be worthless after three years. Only straight-llinedepreciation is allowed by the IRS for the type of machine. ABS Leasing, Inc. offers to lease the same machine to Fresno under an operating lease. Annual Lease payments are $1,200 per year amd are due at the end of each of the three years. The market-wide borrowing rate is 8 percent for loans on assets such as this. Fresnos marginal tax rate is 35 percent.

Question1 : Should Fresno lease the machine of buy it? Assume that Fresno would not borrow to purchase the machine.

Reference no: EM132506273

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