LoTech Welding can purchase a machine for$175,000 and
Chapter , Problem 12-75(choose chapter or problem)
LoTech Welding can purchase a machine for$175,000 and depreciate it as 5-year MACRS prop-erty. Annual maintenance would be $9800, and itssalvage value after 8 years is $15,000. The machinecan also be leased for $35,000 per year on an allcosts inclusive lease (maintenance costs included).Lease payments are due at the beginning of eachyear, and they are tax-deductible. The firms com-bined tax rate for state and federal income taxes is40%.If the firms after-tax interest rate is 9%, whichalternative has the lower EAC and by how much?
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