Use the following information for Question 7, 8, and 9: MLC, Inc. plans to eithe

Question

Use the following information for Question 7, 8, and 9: MLC, Inc. plans to either lease or buy equipment. The equipment has a 3-year life with no salvage expected. The company will depreciate on a straight-line basis over 3 years. The company can borrow the $6 million purchase price at 10% to buy the equipment or make 3 equal end-of-year lease payments of $2.5 million each to lease it. The company's tax rate is 30%. What is the cost of purchasing the equipment?

$4,200,000

$4,031,763

$4,425,410

$4,507,889

none of the above

Question 82 ptsSee Questions 7. What is cost of leasing the equipment? <br>

See Questions 7. What is cost of leasing the equipment?

$3,674,042

$4,592,553

$7,500,000

$4,009,518

none of the above

Question 92 ptsSee Questions 7 and 8. Calculate net advantage to leasing (NAL). Based on NAL, The company should: <br>

See Questions 7 and 8. Calculate net advantage to leasing (NAL). Based on NAL, The company should:

purchase the equipment because NAL is positive

lease the equipment because NAL is positive

purchase the equipment because NAL is negative

lease the equipment because NAL is negative

none of the above

$4,200,000

$4,031,763

Explanation / Answer

Here is excel spreadsheet link for your answer, its a dropbox link so you can download the file and edit it.

https://www.dropbox.com/s/eon5hecffji9if8/MLC%2C%20Inc.xlsx

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