Question: Purchase software for $200,000. Software depreciates $100,000 year 1 and then $100,000 year 2. Maintenance is $3,000/year which is due in January. The residual value

Purchase software for $200,000. Software depreciates $100,000 year 1 and then $100,000 year 2. Maintenance is $3,000/year which is due in January. The residual value of software is $20,000, tax rate is 40%, interest rate after tax is 8%. Lease software at $80,000 per year and will have to have maintenance $3,000/year in January.

For leasing for 0, 1, 2 what is the maintenance tax saving, depreciation tax saving, residual value, tax on residual value, net cash flow, PV & NPV?

For purchasing software for year 0, 1, 2 what is the maintenance tax saving, depreciation tax saving, residual value, tax on residual value, net cash flow, PV & NPV?

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