Your firm needs to either buy or lease $230,000 worth of vehicles. These vehicles have a life of 4 years after which time they are worthless. The vehicles belong in CCA class 10 (a 30% class) and can be leased at a cost of $68,000 a year for the 4 years. The corporate tax rate is 34% and the cost of debt is 10%.

What is the net advantage to leasing?

Question

What is the net advantage to leasing?

Quizplus · Accepted Answer

The net advantage to leasing (NAL) calculation involves comparing the cost of leasing to the cost of buying, taking into account tax savings from depreciation (Capital Cost Allowance, CCA) and interest (if the purchase is financed). Given the information, the correct calculation leads to a NAL of $4,361, indicating that leasing offers a financial advantage over buying by this amount.

Your Firm Needs to Either Buy or Lease $230,000 Worth