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%.

The lessor in this case has a tax rate of 35%. What is the net advantage of leasing to the lessor?

Question

The lessor in this case has a tax rate of 35%. What is the net advantage of leasing to the lessor?

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The Answer of 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%.

The lessor in this case has a tax rate of 35%. What is the net advantage of leasing to the lessor?

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