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1) ABC Transport Company (ATC) is estimating merits of leasing versus purchasing a truck with a four-year life which costs $40,000 and falls into MACRS 3-year class. If firm borrows and purchases truck, the loan rate would be= 10%, and loan would be amortized over truck's 4-year life, so interest expense for taxes would refuse over time. Loan payments would be made at the end of each year. The truck will be utilized for four years, at the end of which time it will be sold at the estimated residual value of 0. If DTC purchases the truck, it would buy the maintenance contract which costs $1,000 per year, payable at the end of each year. The lease terms, that include maintenance, call for a $12,000 lease payment (4 payments total) at beginning of each year. DTC's tax rate is= 40%. What is the net benefit to leasing? Suppose MACRS rates for Years 1 to 4 are 0.3333, 0.4445, 0.1481, and 0.0741.

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