A business has two options:
(A) lease a $ 60,000 machine over a five-year period with an annual lease payment of $ 14,000;
(B) borrow $ 60,000 amount from the bank over the five-year period to buy the asset. The bank would charge a 9 % interest.
Other financial assumptions are:
(c) the company's income tax rate is 30 %;
(d) the capital cost allowance for the equipment is 40 %;
(e) the equipment has no residual value;
B. Calculations related to the five-year purchase option:
-The total before-tax CCA over the five-year period is $________________ .

Question

A business has two options: 
(A) lease a $ 60,000 machine over a five-year period with an annual lease payment of $ 14,000;
(B) borrow $ 60,000 amount from the bank over the five-year period to buy the asset. The bank would charge a 9 % interest.
Other financial assumptions are: 
(c) the company's income tax rate is 30 %; 
(d) the capital cost allowance for the equipment is 40 %; 
(e) the equipment has no residual value;
 B. Calculations related to the five-year purchase option:
-The total before-tax CCA over the five-year period is $________________ .

Quizplus · Accepted Answer

The Answer of A business has two options: 
(A) lease a $ 60,000 machine over a five-year period with an annual lease payment of $ 14,000;
(B) borrow $ 60,000 amount from the bank over the five-year period to buy the asset. The bank would charge a 9 % interest.
Other financial assumptions are: 
(c) the company's income tax rate is 30 %; 
(d) the capital cost allowance for the equipment is 40 %; 
(e) the equipment has no residual value;
 B. Calculations related to the five-year purchase option:
-The total before-tax CCA over the five-year period is $________________ .

A Business Has Two Options