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).

Using straight-line depreciation to a salvage value of zero, what is the net advantage to leasing?
A) -$79,102
B) -$53,266
C) $136,269
D) $138,706
E) $152,062

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) .

Using straight-line depreciation to a salvage value of zero, what is the net advantage to leasing?

Using straight-line depreciation to a salvage value of zero, what is the net advantage to leasing?
A) -$79,102
B) -$53,266
C) $136,269
D) $138,706
E) $152,062

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).

Using straight-line depreciation to a salvage value of zero, what is the net advantage to leasing?
A) -$79,102
B) -$53,266
C) $136,269
D) $138,706
E) $152,062

DogChew Products Needs to Replace Its Rawhide Tanning and Molding