You are the Chief Financial Officer (CFO) of Shah Corporation. You are trying to decide whether to
Question:
You are the Chief Financial Officer (CFO) of Shah Corporation. You are trying to decide whether to lease or buy a new production equipment. Your calculations show that acquisition of the system will have a positive NPV. The system costs $1,350,000 and qualifies for a 25% CCA rate. The equipment will have a $205,000 salvage value in 5 years. Shah Corporation's tax rate is 35%, and the firm can borrow at 6%. Southtown Leasing Company has offered to lease the drilling equipment to Shah Corporation for payments of $300,000 per year. Southtown's policy is to require its lessees to make payments at the start of the year. Based on the given information, what is the NAL for Shah Corporation?
Principles Of Managerial Finance
ISBN: 978-0136119463
13th Edition
Authors: Lawrence J. Gitman, Chad J. Zutter