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Precision Tool is trying to decide whether to lease or buy some new equipment for its...

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Finance

Precision Tool is trying to decide whether to lease or buy somenew equipment for its tool and die operations. The equipment costs$55,000, has a 3-year life and will be worthless after the 3 years.The pre-tax cost of borrowed funds is 6 percent and the tax rate is33 percent. The equipment can be leased for $17,500 a year. What isthe net advantage to leasing?

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