Your company requires a new truck to expand its delivery range.The cost of this truck is $38,000.The life of this asset should be 6 years with a $5,500 salvage value.Inquiries to a few banks have shown that a loan for the full amount is available with a yearly interest payment of 14%.Another option is to add this asset to the lease you already have.The leasing company has told you it will purchase the truck and lease it to you for an initial payment of $8,300 and an annual payment of $8,300 at the end of each of the next 6 years (a total of 7 payments).The company's tax rate is 38%,and the CCA rate of the asset pool of the truck is 20%.
a) Will you proceed with the lease or buy the asset?
b) What will the salvage value have to be before you change your decision?

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The Answer of Your company requires a new truck to expand its delivery range.The cost of this truck is $38,000.The life of this asset should be 6 years with a $5,500 salvage value.Inquiries to a few banks have shown that a loan for the full amount is available with a yearly interest payment of 14%.Another option is to add this asset to the lease you already have.The leasing company has told you it will purchase the truck and lease it to you for an initial payment of $8,300 and an annual payment of $8,300 at the end of each of the next 6 years (a total of 7 payments).The company's tax rate is 38%,and the CCA rate of the asset pool of the truck is 20%.
a) Will you proceed with the lease or buy the asset?
b) What will the salvage value have to be before you change your decision?

Your Company Requires a New Truck to Expand Its Delivery