PonchoParts, Inc. manufactures reproduction parts for classic cars. The ﬁrm needs a computer- operated turret lathe that costs $440,000. It can borrow at 9.5%. The lathe will be used for ﬁve
Years, after which it will have a salvage value of $50,000. Enterprising Leasing, Inc. will lease the
Equipment to the ﬁrm for $100,000 per year. The ﬁrm's tax rate is 34%. If the lathe belongs in a 30%
CCA class, what is the net advantage to leasing (NAL)?

Question

Quizplus · Accepted Answer

The net advantage to leasing (NAL) is calculated by comparing the after-tax cost of leasing to the after-tax cost of owning. The correct calculation shows a small positive advantage to leasing, resulting in an NAL of $105.