What are the benefits and drawbacks of leasing-sandia inc

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PART (A)

Sandia, Inc. wants to acquire a $360,000 computer controlled printing press. If owned the press would be depreciated on a straight-line basis over 10 years to a book salvage value of $0. The actual cash salvage value is expected to be $25,000 at the end of 10 years. If purchased, Sandia will incur annual maintenance expenses of $3,000. These expenses would not be incurred if the press is leased. If the press is purchased, Sandia could borrow the needed funds at an annual pretax interest rate of 10%. The lease rate would be $48,000 per year, payable at the beginning of each year. If Sandia has an after-tax cost of capital of 12% and a marginal tax rate of 40%, what is the net advantage to leasing? 11

PART (B)

What are the benefits and drawbacks of leasing?

Reference no: EM132412441

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