Asked by
maria nunez
on Dec 08, 2024
Verified
Maxine's is considering either purchasing or leasing a $600,000 piece of specialized equipment. The equipment has a life of 5 years, belongs in a 30% CCA class, and will have no residual value. The cost of debt is 12% for this purchase. A lease on the equipment for 5 years is priced at $150,000 a year. Maxine's corporate tax rate is 34%. The lessor has a tax rate of 35%. What is the net advantage to leasing for Maxine?
A) $17,044
B) $17,190
C) $17,320
D) $17,400
E) $17,690
CCA Class
This refers to a categorization system used for tax purposes to group depreciable assets by their useful life, affecting how capital cost allowance is calculated.
Net Advantage
The overall benefit or profit derived from making a particular investment decision, considering all financial impacts.
Corporate Tax Rate
The percentage of corporate profits that is paid to the government as tax, varying by country and sometimes by the size or type of corporation.
- Determine the net advantage to leasing (NAL) across diverse assets factoring in tax rates, depreciation, interest rates, and lease payments.
Verified Answer
AM
Learning Objectives
- Determine the net advantage to leasing (NAL) across diverse assets factoring in tax rates, depreciation, interest rates, and lease payments.