FIN 370CaledoniaProject Paper

1. Should the project be accepted? Why or why not? 2. Describe factors Caledonia must consider if it were to lease versus buying

Describe factors Caledonia must consider if they were doing a lease versus buy?

Answer

Now that Caledonia is considering the introduction of two new projects A and B, they have to make a decision between leasing or buying. According to Chapter 10, "They are currently in the 34 percent marginal tax bracket with a 15 percent required rate of return or cost of capital, and is expected to last five years" (2010).

When leasing, Caledonia must consider the advantage of reducing out of pocket cost. A disadvantage is that the product being leased is not personally owned until paid off. When leasing a product, Caledonia must consider...