DogChew Products Needs to Replace Its Rawhide Tanning and Molding

question 247

Multiple Choice

DogChew Products needs to replace its rawhide tanning and molding equipment. It can be used for five years and will have no salvage value. The equipment costs $930,000. The firm can lease it for $245,000 a year, or it can borrow the money to purchase the equipment at 9%. The firm's tax rate is 39%. The CCA rate is 20% (Class 8) .

Assume your company will not pay taxes for the next five years. Now what is the net advantage to leasing?

• A) -$108,731
• B) -$88,132
• C) -$2,837
• D) $138,706
• E) $152,062