Precision tool is trying to decide whether to lease or buy


Precision Tool is trying to decide whether to lease or buy some new equipment for its tool and die operations. The equipment costs $53,000, has a 3-year life and will be worthless after the 3 years. The pre-tax cost of borrowed funds is 6 percent and the tax rate is 34 percent. The equipment can be leased for $19,500 a year. What is the net advantage to leasing?

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Financial Management: Precision tool is trying to decide whether to lease or buy
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