Question

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 $5,000,000 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 $1,500,000 per year for 4 years. Assume the tax rate is 35 percent. You can borrow at 7 percent before taxes. What is the net advantage to leasing (NAL) from your company's standpoint? (Do not round your intermediate calculations.)

rev: 09_22_2012

$-58,384.65

$61,457.52

$-61,457.52

$215,564.1

$-64,530.4

Answer 1