(Answered)-Penn Medical Center, a for-profit entity, is considering the - (2025 Updated Original AI-Free Solution

Question

1. Penn Medical Center, a for-profit entity, is considering the purchase of a 64-slice CT scanner.? The cost of the scanner is $5 million.? The scanner would be depreciatied over 10 years on a straight line basis to a zero salvage value.? The tax rate is 40%.? The financing options include either borrowing for the full cost of the scanner or leasing a scanner.? The lease option is a 5-year lease with equal before-tax lease payments of $999,000 per year.? The borrowing alternative is a 5-year loan covering the entire cost of the scanner at an interest rate of 5% which is also the implied lease rate.? The after-tax cost of debt is 3%.?

   a.? Calculate the total cost to purchase the CT scanner over 5 years.

   b.? Calculate the total cost to lease the CT sanner over 5 years.

   c.? Should Penn Medical purchase or lease the CT scanner??