The Round Top is contemplating the acquisition of some new tents. The purchase price is $156,000. The CCA represents 33.33 percent, 44.44 percent, 14.82 percent, and 7.41 percent of the value over
Years 1 to 4, respectively. The tents will be worthless after four years. The tents can be leased for
Four years at $40,500 a year. The ﬁrm can borrow money at 8.5 percent and has a 35 percent tax
Rate. What is the net advantage to leasing?
A) $14,107
B) $14,470
C) $14,596
D) $15,211
E) $15,407

Question

Quizplus · Accepted Answer

The net advantage to leasing is calculated by comparing the after-tax cost of leasing with the after-tax cost of owning, including the tax shield from CCA. The correct calculation results in a net advantage of $14,596.

The Round Top Is Contemplating the Acquisition of Some New