Boyer Services needs some equipment costing $56,000. The equipment has a 4-year life after which it will be worthless. The firm uses MACRS depreciation which allows for 33.33 percent, 44.44 percent, 14.82 percent, and 7.41 percent depreciation over years 1 to 4, respectively. The equipment can be leased for $15,100 a year. The firm can borrow money at 9.5 percent and has a 35 percent tax rate.

What is the incremental annual cash flow for year 2 if the company decides to lease the equipment rather than purchase it?

Question

What is the incremental annual cash flow for year 2 if the company decides to lease the equipment rather than purchase it?

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The Answer of Boyer Services needs some equipment costing $56,000. The equipment has a 4-year life after which it will be worthless. The firm uses MACRS depreciation which allows for 33.33 percent, 44.44 percent, 14.82 percent, and 7.41 percent depreciation over years 1 to 4, respectively. The equipment can be leased for $15,100 a year. The firm can borrow money at 9.5 percent and has a 35 percent tax rate.

What is the incremental annual cash flow for year 2 if the company decides to lease the equipment rather than purchase it?

Boyer Services Needs Some Equipment Costing $56,000