Riverton Mining plans to purchase or lease $220,000 worth of excavation equipment. If pur- chased,...

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Riverton Mining plans to purchase or lease $220,000 worth of excavation equipment. If purchased, the equipment will be depreciated on a straight-line basis over 5 years, after which it will be worthless. If leased, the annual lease payments will be $55,0
Riverton Mining plans to purchase or lease $220,000 worth of excavation equipment. If purchased, the equipment will be depreciated on a straight-line basis over 5 years, after which it will be worthless. If leased, the annual lease payments will be $55,000 per year for 5 years.
Assume Riverton’s bo
owing cost is 8%, its tax rate is 35%, and the lease qualifies as a true tax lease.
a. If Riverton purchases the equipment, what is the amount of the lease-equivalent...

Robert · Accepted Answer

Riverton Mining plans to purchase or lease $220,000 worth of excavation equipment. If purchased, the equipment will be depreciated on a straight-line basis over 5 years, after which it will be worthless. If leased, the annual lease payments will be $55,0
Riverton Mining plans to purchase or lease $220,000 worth of excavation equipment. If purchased, the equipment will be depreciated on a straight-line basis over 5 years, after which it will be worthless. If leased, the annual lease payments will be $55,000 per year for 5 years.
Assume Riverton’s borrowing cost is 8%, its tax rate is 35%, and the lease qualifies as a true tax lease.
a. If Riverton purchases the equipment,

Riverton Mining plans to purchase or lease $220,000 worth of excavation equipment. If pur- chased, the equipment will be depreciated on a straight-line basis over five years, after which it will be...

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