Riverside Inc. plans to purchase or lease $220,000 worth of new equipment. If purchased, the equipment will be depreciated on a straight-line basis over five years, after which it will be worthless. If leased, the annual lease payments will be $55,000 per year for five years. Assume Riverside’s borrowing cost is 8%, its tax rate is 35%, and the lease qualifies as a true tax lease. If Riverton purchases the equipment, what is the amount of the lease-equivalent loan? a. $292,884 b. $192,488 c. $197,358 d. $195,70 0 e. $190,237

Riverside Inc. plans to purchase or lease $220,000 worth of new equipment. If purchased, the equipment will be depreciated on a straight-line basis over five years, after which it will be worthless. If leased, the annual lease payments will be $55,000 per year for five years. Assume Riverside’s borrowing cost is 8%, its tax rate is 35%, and the lease qualifies as a true tax lease. If Riverton purchases the equipment, what is the amount of the lease-equivalent loan? a. $292,884 b. $192,488 c. $197,358 d. $195,70 0 e. $190,237

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 9P

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