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    Lease or Buy decision

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    Assume the Reynolds's tax rate is 40 percent and the equipment's depreciation would be $100 per year. If the company leased the asset on a 2-year lease, the payment would be $110 at the beginning of each year. If Reynolds borrowed and bought, the bank charge 10 percent interest on the loan. In either case, the equipment is worth nothing after 2 years and will be discarded. Should Reynolds lease or buy the equipment?

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    https://brainmass.com/economics/banking/lease-or-buy-decision-374247

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    19-2 Assume the Reynolds's tax rate is 40 percent and the equipment's depreciation would be $100 per year. If the company leased the asset on a 2-year lease, the payment would be $110 at the beginning of each year. If Reynolds borrowed and bought, the bank charge 10 percent interest on the loan. In either case, the equipment is worth nothing after 2 years and will be discarded. Should Reynolds lease or buy the equipment?

    a. Calculate the cost of purchasing the equipment. 
    Loan amount $200 ...

    Solution Summary

    This post shows how to choose between lease and buy decision for Reynold.

    $2.19