DogChew Products needs to replace its rawhide tanning and molding equipment. It can be used for five years and will have no salvage value. The equipment costs $930,000. The firm can lease it for $245,000 a year, or it can borrow the money to purchase the equipment at 9%. The firm's tax rate is 39%. The CCA rate is 20% (Class 8).

What is the after-tax lease payment?
A) $95,550
B) $106,150
C) $123,350
D) $149,450
E) $245,000

Question

DogChew Products needs to replace its rawhide tanning and molding equipment. It can be used for five years and will have no salvage value. The equipment costs $930,000. The firm can lease it for $245,000 a year, or it can borrow the money to purchase the equipment at 9%. The firm's tax rate is 39%. The CCA rate is 20% (Class 8) .

What is the after-tax lease payment?

What is the after-tax lease payment?
A) $95,550
B) $106,150
C) $123,350
D) $149,450
E) $245,000

Quizplus · Accepted Answer

The Answer of DogChew Products needs to replace its rawhide tanning and molding equipment. It can be used for five years and will have no salvage value. The equipment costs $930,000. The firm can lease it for $245,000 a year, or it can borrow the money to purchase the equipment at 9%. The firm's tax rate is 39%. The CCA rate is 20% (Class 8).

What is the after-tax lease payment?
A) $95,550
B) $106,150
C) $123,350
D) $149,450
E) $245,000

DogChew Products Needs to Replace Its Rawhide Tanning and Molding