Consider the following information: original investment = $2,500,PV of CCA tax shield = $850,PV of after-tax lease payments = $1,700.What is the NAL?

Question

Quizplus · Accepted Answer

NAL (Net Advantage to Leasing) is calculated as the sum of the present value of the CCA tax shield and the present value of after-tax lease payments minus the original investment. So, NAL = $850 + $1,700 - $2,500 = $2,550 - $2,500 = $50. However, since the original investment is an outflow, it should be subtracted, making the correct calculation: $850 + $1,700 - $2,500 = $50 negative, hence the answer is -$50.

Consider the Following Information: Original Investment = $2,500,PV of CCA