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Question 57 Your company is considering the purchase of a fleet of cars for $200,000. It...

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

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Homework Answers

Answer #1
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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