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Chapter 6

Solution

The answer is (C).

PV of buying = $28,000 – ($3,000 × 0.386) = $26,842

PV of lease payments (years 09)

= $3,800 × (1 + 5.759) = $25,684

PV of lease tax relief (years 211)

= $3,800 × 0.35 × 5.586 = $7,429

So the benefit of leasing is 26,842 – 25,684 + 7,429 = $8,587

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