Vision Inc. is considering leasing an equipment. The equipment costs $3,000,000 and it would be depreciated...

  

Transcribed Image Text:

Vision Inc. is considering leasing an equipment. The equipment costs $3,000,000 and it would be depreciated straight-line to zero over 4 years. It will be worthless in 4 years. Lease payment is $750,000 per year for 4 years. Assume the tax rate is 35 percent. The company borrow at 9 percent before taxes. What is the net advantage to leasing (NAL) for the company? Vision Inc. is considering leasing an equipment. The equipment costs $3,000,000 and it would be depreciated straight-line to zero over 4 years. It will be worthless in 4 years. Lease payment is $750,000 per year for 4 years. Assume the tax rate is 35 percent. The company borrow at 9 percent before taxes. What is the net advantage to leasing (NAL) for the company?

Answer rating: 100% (QA)

To calculate the Net Advantage to Leasing NAL we need to compare the cash flows associated with leas... View the full answer