Quiz Company has a 12 year lease,with payments of $250,000 made at the beginning of each year.If no purchase option exists,and the company is in the 40% tax bracket,what is the annual after-tax cash outflow on the lease?

Question

Quizplus · Accepted Answer

The annual lease payment is $250,000. Since lease payments are tax-deductible, the tax savings is 40% of $250,000, which is $100,000. Therefore, the after-tax cash outflow is $250,000 - $100,000 = $150,000.

Quiz Company Has a 12 Year Lease,with Payments of $250,000