New health system lease


New Health Hospital Systems wants to either borrow money to purchase a hospital or else enter into a lease agreement with the city of Chesterville. The purchase price of the hospital is $35 million. Assuming 100% financing, the interest rate is 8% for the loan with an after-tax cost of debt of 5%. The length of the loan is 5 years. The before-tax lease payments are expected to be $8 million per year. The tax rate is 40%n for New Health System. Should New Health System lease or borrow the money to purchase the hospital?

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Accounting Basics: New health system lease
Reference No:- TGS0673430

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