Comey Products has decided to acquire some new equipment having a $220,000 purchase price. The equipment will last four years and is in the MACRS 3-year class. (The depreciation rates for Year 1 through Year 4 are 0.3333, 0.4445, 0.1481, and 0.0741.) The firm can borrow at a 7% rate and pays a 25% federal-plus-state tax rate. Comey is considering leasing the property but wishes to know the cost of borrowing that it should use when comparing purchasing to leasing and has hired you to answer this question. What is the correct answer to Comey's question? Do not round intermediate calculations. Round your answer to the nearest dollar.
Comey Products has decided to acquire some new equipment having a $220,000 purchase price. The equipment will last four years and is in the MACRS 3-year class. (The depreciation rates for Year 1 through Year 4 are 0.3333, 0.4445, 0.1481, and 0.0741.) The firm can borrow at a 7% rate and pays a 25% federal-plus-state tax rate. Comey is considering leasing the property but wishes to know the cost of borrowing that it should use when comparing purchasing to leasing and has hired you to answer this question. What is the correct answer to Comey's question? Do not round intermediate calculations. Round your answer to the nearest dollar.
Chapter1: Financial Statements And Business Decisions
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Transcribed Image Text:Comey Products has decided to acquire some new equipment having a $220,000
purchase price. The equipment will last four years and is in the MACRS 3-year class.
(The depreciation rates for Year 1 through Year 4 are 0.3333, 0.4445, 0.1481, and
0.0741.) The firm can borrow at a 7% rate and pays a 25% federal-plus-state tax rate.
Comey is considering leasing the property but wishes to know the cost of borrowing
that it should use when comparing purchasing to leasing and has hired you to
answer this question. What is the correct answer to Comey's question? Do not
round intermediate calculations. Round your answer to the nearest dollar.
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