MTN is trying to decide whether to lease or buy some new equipment for its tool and die operations. The equipment costs ¢1.5 million has a 8-year life, and will be worthless after the 8 years. The pre-tax cost of borrowed funds is 8 percent and the tax rate is 32 percent. The equipment can be leased for ¢240,000 a year. What is the net advantage to leasing (NAL)?

MTN is trying to decide whether to lease or buy some new equipment for its tool and die operations. The equipment costs ¢1.5 million has a 8-year life, and will be worthless after the 8 years. The pre-tax cost of borrowed funds is 8 percent and the tax rate is 32 percent. The equipment can be leased for ¢240,000 a year. What is the net advantage to leasing (NAL)?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 9P

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