It Is Time for the Renewal of Existing Photocopying Equipment

question 149

Essay

It is time for the renewal of existing photocopying equipment at Runt Ltd.New equipment will cost $95,000 and this amount can be borrowed from the local bank at 7 percent interest with annual payments at the end of the year.The CCA rate on the equipment would be 20 percent.The equipment will be salvaged in 5 years for $24,000.The current equipment is worth $12,500.Runt could also lease the equipment with annual lease payments of $20,000 payable at the beginning of each year,which would avoid the annual maintenance expense of $1,250 involved if they purchase the equipment.Cost of capital is 14 percent.The tax rate is 40 percent.
Should Runt Ltd.lease or borrow to purchase the photocopying equipment?

---

Definitions:

Organizational Success

The achievement of the goals and objectives set by an organization, often measured by metrics such as profitability, market share, or stakeholder satisfaction.

Job Specification

A detailed description of the skills, education, and experience required to perform a job.

HRIS

Human Resource Information System, a digital solution for managing and automating the organization's HR processes.

Organizational Effectiveness

The efficiency with which an organization is able to meet its objectives.