Should new health system lease or borrow the money

Reference no: EM13304879

New Health Hospital Systems wants to either borrow money to purchase a hospital or else enter into a new lease agreement with the city of Chesterville. The purchase price of the hospital is $35 million. Assuming 100 percent financing, the interest rate is 8 percent for the loan with an after-tax cost of debt of 5 percent. The length of the loan is five years. The before tax rate is 40 percent for New Health System. Should New Health System lease or borrow the money to purchase the hospital?

Reference no: EM13304879

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