Question 57
Your company is considering the purchase of a fleet of cars for $200,000. It can borrow at 6%. The cars will be used for four years. At the end of four years they will be worthless. You call a leasing agent and find that the cars can be leased for $55,000 per year. The corporate tax rate is 34% and the cars belong in CCA class 10 (a 30% class), what is the net advantage to leasing?
Select one:
a. $5,399
b. $1,802
c. $3,434
d. $3,961
e. $1,134
Loan Principle Amount | 200,000.00 | ||
Annual Interest Rate | 6.00% | ||
Loan Period (in year) | 4.00 | ||
Repayment | 57,718.00 |
Lease Benefit | ||||
Y1 | Y2 | Y3 | Y4 | |
Cash inflow | 55000 | 55000 | 55000 | 55000 |
Loan repayment | -57718 | -57718 | -57718 | -57718 |
drepreciation (CCA @30%) | -60000 | -42000 | -29400 | -20580 |
Net cash flow | -62718 | -44718 | -32118 | -23298 |
Tax @34% | 0 | 0 | 0 | 0 |
Lease benefit = 0
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