Consider the following information: original investment = $3,500,PV of CCA tax shield = $1,850,PV of after-tax lease payments = $2,000.What is the NAL?

Question

Quizplus · Accepted Answer

NAL (Net Advantage to Leasing) is calculated as the sum of the present value of after-tax lease payments and the present value of CCA tax shield minus the original investment. So, NAL = $2,000 + $1,850 - $3,500 = $350. Since the question asks for the NAL and the calculation results in a positive $350, but as an oversight in sign interpretation, the correct mathematical outcome should reflect the net position accurately. The correct approach to determining the NAL involves accurately subtracting the total of the PV of after-tax lease payments and the PV of CCA tax shield from the original investment, leading to a reevaluation of the provided options.

Consider the Following Information: Original Investment = $3,500,PV of CCA