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What is the tax savings for years

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Reference no: EM132741726

The PV of the cash outflows for leasing is $27,890. A firm could buy the asset for $30,000 by borrowing the funds at 10 percent for three years. Interest will be paid annually and the entire loan repaid at maturity. The firm's tax rate is 20 percent.

  • If the firm does buy, maintenance will be $1,000 in year one and increase by $1,000 each year.
  • The estimated salvage value is $0, and depreciation will be $10,000 annually.

Cash flows under purchasing and borrowing:

Year 0 1 2 3

Tax Savings

Problem 1: What is the tax savings for YEARS 0, 1 , 2, 3?

Reference no: EM132741726

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