YOU company has decided to acquire a piece of equipment and is consi or leasing the asset that you plan to use for 4 years. you have the following: Purchase price:$10million Deperciation: 4 year, straight line Expected salvge value:$2 million yearly lease payment(made at the beginning of the year):$2.5 million tax rate: 35% cost of equity:10% cost of Debt 6.15% debt/equity Ration:1/2
what is the cost of ownership?
what is the cost of leasing?
should the company buy or lease the equipment?
how sensitive is your decision to the salvage value?