Frozen Foods Delivery is considering the purchase of a delivery truck costing $49,000.The truck can be leased for 3 years at $19,500 per year or it can be purchased at an interest rate of 7.5 percent.The estimated life of the truck is 3 years.The corporate tax rate is 34 percent.The company does not expect to owe any taxes for the next several years due to accumulated net operating losses.The firm uses straight-line depreciation.What is the net advantage to leasing?

Question

Quizplus · Accepted Answer

NAL = $49,000 - ($19,500) (PVIFA_{7.5%, 3}) = -$1,710

Frozen Foods Delivery Is Considering the Purchase of a Delivery