Problemprecision tool is trying to decide whether to lease, Ask an Expert

Accounting

Problem:

Precision Tool is trying to decide whether to lease or buy some new equipment for its tool and die operations. The equipment costs $51,000, has a 3-year life and will be worthless after the 3 years. The pre-tax cost of borrowed funds is 9 percent and the tax rate is 33 percent. The equipment can be leased for $17,500 a year.

Required:

Question: What is the net advantage to leasing?

Note: Please answer in proper manner and show all computations

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91171130

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