Question

comey products has decided to acquire some new equipment having a $210,000 purchase price. the equipment will last 4 years and is in the macrs 3-year class. (the depreciation rates for year 1 through year 4 are equal to 0.3333, 0.4445, 0.1481, and 0.0741.) the firm can borrow at a 10% rate and pays a 25% federal-plus-state tax rate. comey is considering leasing the property but wishes to know the cost of borrowing that it should use when comparing purchasing to leasing and has hired you to answer this question. what is the correct answer to comey’s question? (hint: use the shortcut method to find the after-tax cost of the loan payments.) do not round intermediate calculations. round your answer to the nearest dollar.

Answer 1

The total amount of interest paid on the principal loan during the best period is typically used to calculate a company's cost of debt.The cost of debt is calculated by dividing that number by the total amount of debt and interest paid.

Debt costs after taxes are based on expenses incurred from interest earnings. We get it by dividing 1 by the effective tax rate first

What is the debt's carrying cost?

The term "cost of carry" refers to expenses connected with an investment's carrying value. Financial costs like bond interest costs, margin account interest costs, investment loan interest, and any storage costs associated with holding a physical asset are examples of these costs.

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