Allied Logistics Ltd. is considering leasing new computer equipment that will cost $30,000 (including shipping and instalation). The lease payment is $5,000 per year for 4 years, paid at the beginning of each year. Other information pertaining to the equipment is as follows:
- maintenance of $500 per year will be paid by the lessor
- Allied's tax rate is 35%
- CCA rate on equipment is 30%
- Allied's cost of borrowing is 6%
- estimated residual value at the end of the 5 years is expected to be $6,000
Based on that information what is the...
1) present value of after-tax lease payments
2) PV of CCA tax shield
3) PV of after tax maintenance costs
4) PV of residual value
The present value of the CCA tax shield makes leasing the equipment more/less valuable to Applied Logistics.
The PV of after tax maintenance costs makes leasing the equipement more/less valuable to Applied Logistics.
What is the Net Advantage to Leasing (NAL) for Applied Logistics? ($5,179; $3,837; $4,403)