Asked by
Mylee George
on Nov 07, 2024
Verified
Aldo, Inc. is trying to decide whether to lease or buy some new equipment. The equipment costs $59,000, has a 3-year life, and belongs in a 25 percent CCA class. The equipment will be worthless after the 3 years and will have to be replaced. The company has a tax rate of 34 percent and a cost of borrowed funds of 10 percent. The equipment can be leased for $22,000 a year. What is the amount of the after-tax lease payment?
A) $7,480
B) $14,520
C) $14,750
D) $16,500
E) $22,000
CCA Class
In the context of Canadian tax, a classification for tax purposes that dictates the rate at which assets can be depreciated for tax deductions.
After-Tax Lease Payment
The lease payment amount remaining after taxes have been deducted, reflecting the net cost to the lessee.
Tax Rate
The percentage at which an individual or corporation is taxed, which can vary depending on income level, type of income, or other factors.
- Analyze the monetary consequences post-tax of entering into equipment lease agreements, including evaluating lease payments and their tax effects.
Verified Answer
ML
Learning Objectives
- Analyze the monetary consequences post-tax of entering into equipment lease agreements, including evaluating lease payments and their tax effects.