Question: Wright State is trying to decide whether to lease or buy some new equipment from Mead. The equipment costs $200,000 and has no salvage value.

Wright State is trying to decide whether to lease or buy some new equipment from Mead. The equipment costs $200,000 and has no salvage value. It will be depreciated straight-line over 20 years. WSU pays no taxes. There are 21 annual pre-paid lease payments of $27,000. The before-tax interest rate is 15%. Mead's tax rate is 40%. Find the net advantage to leasing for the lessee (WSU)?

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