You should lease rather than buy when the:
A) IRR from leasing exceeds the aftertax cost of borrowing.
B) annual loan payments for a purchase are less than the annual lease payments.
C) NAL from leasing is positive.
D) IRR from leasing exceeds the risk-free rate of return.
E) asset's life is less than five years.

Question

Quizplus · Accepted Answer

When the Net Advantage to Leasing (NAL) is positive, it means that leasing is more beneficial than buying. NAL takes into account the present value of all cash flows associated with leasing and purchasing, including tax benefits, and subtracts the present value of the costs. Therefore, a positive NAL means that leasing is a more financially attractive option than buying.

You Should Lease Rather Than Buy When The