Should hha lease the asset or borrow and purchase it assume


HHA Corporation is trying to decide whether to borrow and purchase research equipment. If it leases the equipment, it will have beginning of year payments of $93,500 every year for 3 years. The lessor will incur all maintenance costs. If it borrows to purchase, the firm is faced with a 10% non-amortized loan over the 3-year period. The equipment costs $250,000 and is in the MACRS-3 class. Maintenance costs on the equipment are $5,000 each year. If it buys the equipment, HHA expects it to have a residual value of $45,000. Should HHA lease the asset or borrow and purchase it? Assume the company faces an average tax rate of 40%.

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Financial Management: Should hha lease the asset or borrow and purchase it assume
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