CoursHeroTranscribedText: Rl's Chrome Rim Corporation is debating whether to acquire an asset through an operating...
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CoursHeroTranscribedText: Rl's Chrome Rim Corporation is debating whether to acquire an asset through an operating lease arrangement or to borrow funds and purchase the asset. The purchase price of the asset, $125,000, can be financed with a fiveyear, 9% bank loan. If purchased, the asset will be placed in a CCA class of 20% with an expected salvage value of $12,000 at the end of its five year life. Alternatively, the firm can obtain the use of the asset with an operating lease of five years. The lease payments would be $30,000 at the beginning of each year. The firm's tax rate is 35% and corporation cost of capital is 15%. Which alternative should be selected based on minimizing the present value of aftertax costs? WofCCATax Shield: [C-Slx dT x 14-115 r r+d 1+r
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