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Stanley Inc. must purchase $10,000,000 worth of service equipment and is weighing the merits of leasing the equipment or purchasing. The company has a zero tax rate due to tax loss carry-forwards, and is considering a 10-year, bank loan to finance the equipment. The loan has an interest rate of 8% and would be amotized over 10 years, with 10 end-of-year payments. Stanley can also lease the equipment for 10 end-of-year payments of $1,570,000 each. How much larger or smaller is the bank loan payment than the lease payment?

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Financial Management, Finance

Category:- Financial Management
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