Multiple Choice
Do-Rite Construction is evaluating the lease versus the purchase of a machine costing $168,000 that would be depreciated using MACRS over a four-year period, after which the machine would be worthless. MACRS rates are 33.33 percent, 44.44 percent, 14.82 percent, and 7.41 percent for Years 1 to 4, respectively. The machine could be leased for $46,500 a year for four years. The firm can borrow at 8.5 percent and has a tax rate of 21 percent. However, the firm does not expect to pay any taxes for the next five years. What is the net advantage to leasing?
A) −$4,502
B) $15,685
C) $18,640
D) −$1,651
E) $3,277
Correct Answer:
Verified
Correct Answer:
Verified
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