Multiple Choice
MIG Tools can either lease or buy some equipment. The lease payments would be $12,800 a year and the purchase price is $35,900. The equipment has a 3-year life after which it is expected to have a resale value of $5,000. The firm uses 100 percent bonus depreciation, borrows money at 8 percent, and has a tax rate of 21 percent. What is the incremental cash flow for Year 1 if the company decides to lease the equipment rather than purchase it?
A) −$19,405
B) −$16,805
C) −$17,651
D) −$14,184
E) −$14,905
Correct Answer:
Verified
Correct Answer:
Verified
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