You work for a nuclear research laboratory that is contemplating leasing a diagnostic scanner (leasing is a very common practice with expensive, high-tech equipment). The scanner costs $3,000,000 and it would be depreciated straight-line to zero over 4 years. Because of radiation contamination, it will actually be completely valueless in 4 years. You can lease it for $900,000 per year for 4 years. Assume a 32 percent tax bracket. You can borrow at 10 percent before taxes. What is the net advantage to leasing (NAL) from the lessor's viewpoint? |
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