Question 50 (3 points)

Changsha Charters Limited has just completed their capital budgeting analysis of projects for the coming year and have identified several projects they would like to complete (positive NPV). One of the projects is the purchase of a fleet of sailboats at a cost of $810,000. Changsha's before tax cost of debt is 9% and their tax rate is 40%. They have approached KAT Leasing Inc to inquire about leasing the sailboats instead of purchasing. KAT Leasing Inc. has provided Changsha with the following proposal:

- The present value of the annual lease payments would be $520,000. The lease is over 5 years with payments made at the beginning of each year.

- If Changsha purchases the sailboats, they estimate the annual maintenance costs to be $40,000 per year. Under the terms of the lease, the lessee would be responsible for the annual maintenance costs, which are made at the end of each year.

- The PVCCA tax shield is $210,000.

- The PV of the the salvage value is $100,000.

The NAL (Net Advantage to Leasing) is $______(please use negative sign if negative, not brackets. Round to the nearest dollar. Do not use commas or dollar sign)

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