Your company is considering the purchase of a ﬂeet of cars for $195,000. It can borrow at 8.5%. The cars will be used for four years. At the end of four years they will be worthless. The corporate tax
Rate is 34%. The cars belong in CCA class 10 (a 30% class). What is the break-even lease payment?

Question

Quizplus · Accepted Answer

The break-even lease payment is calculated by considering the after-tax cost of borrowing, the tax shield from CCA, and the depreciation of the asset. The correct calculation results in a break-even lease payment of $57,705.

Your Company Is Considering the Purchase of a ﬂEet of Cars