Your company is considering leasing an expensive piece of equipment, which costs $9,100,000, and it would be depreciated straight-line to zero over 5 years, after that it will be worthless. Your company is debating to lease or buy. The lease expense would be $2,457,000 per year for 5 years. The corporate tax rate is 30% . Firm's riskless borrowing rate is 13% before taxes. What is annual depreciation tax shield $ ; what is aftertax lease payment $ ; what is discount rate for this lease choice question.

What is net advantage of lease (NAL) for this question ?

Answer rating: 100% (QA)

To calculate the annual depreciation tax shield we can use the formula Annual depreciation tax shield Depreciation expense x Tax rate Since the equipm... View the full answer