Ma1.Please give only typed answer. It is time for the renewal of existing photocopying equipment at Runt Ltd. New equipment will cost $95,000 and this amount can beborrowed from the local bank at 7 percent interest with annual payments at the end of the year. The CCA rate on the equipment wouldbe 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 eachyear, 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.In this lease vs borrow to purchase problem:1. The present value of the lease payments is:O($17,812)O($92,257)O($17,326)O($15,849)2. What is the present value of the tax-savings of lease payments?O$8,324O$35,415O$17,326O$12,8493. PV of maintenance payments is:4. PV of salvage value is:5: PV CCA is:

According to bartleby guidelines , if question involves multiple subparts ,then 1st sub 3 parts…

Answered: It is time for the renewal of existing…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 9P

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