Maxine's is considering either purchasing or leasing a $600,000 piece of specialized equipment. The equipment has a life of 5 years, belongs in a 30% CCA class, and will have no residual value. The cost of debt is 12% for this purchase. A lease on the equipment for 5 years is priced at $150,000 a year. Maxine's corporate tax rate is 34%. The lessor has a tax rate of 35%.

What is the amount of annual depreciation Maxine's can claim in the first year if the firm purchases the equipment?
A) $60,000
B) $90,000
C) $120,000
D) $160,000
E) $180,000

Question

Maxine's is considering either purchasing or leasing a $600,000 piece of specialized equipment. The equipment has a life of 5 years, belongs in a 30% CCA class, and will have no residual value. The cost of debt is 12% for this purchase. A lease on the equipment for 5 years is priced at $150,000 a year. Maxine's corporate tax rate is 34%. The lessor has a tax rate of 35%.

What is the amount of annual depreciation Maxine's can claim in the first year if the firm purchases the equipment?

What is the amount of annual depreciation Maxine's can claim in the first year if the firm purchases the equipment?
A) $60,000
B) $90,000
C) $120,000
D) $160,000
E) $180,000

Quizplus · Accepted Answer

The Answer of Maxine's is considering either purchasing or leasing a $600,000 piece of specialized equipment. The equipment has a life of 5 years, belongs in a 30% CCA class, and will have no residual value. The cost of debt is 12% for this purchase. A lease on the equipment for 5 years is priced at $150,000 a year. Maxine's corporate tax rate is 34%. The lessor has a tax rate of 35%.

What is the amount of annual depreciation Maxine's can claim in the first year if the firm purchases the equipment?
A) $60,000
B) $90,000
C) $120,000
D) $160,000
E) $180,000

Maxine's Is Considering Either Purchasing or Leasing a $600,000 Piece