Asked by
Christins Skillset
on Dec 08, 2024
Verified
Rosie's Kitchen needs some new commercial ovens. The purchase price is $56,000. The ovens will be worthless after 4 years. The ovens belong in a 30 percent CCA class and can be leased for $16,500 a year. The firm can borrow money at 7.5 percent and has a 34 percent tax rate. What is the net advantage to leasing?
A) -$2,423
B) -$1,289
C) -$532
D) $532
E) $1,289
CCA Class
Capital Cost Allowance Class; categories used in Canadian income tax that determine the depreciation rate for different types of assets for tax purposes.
Net Advantage To Leasing
The financial benefit that results when leasing an asset is more cost-effective than purchasing the asset outright.
- Figure out the net positive effect of leasing (NAL) and grasp its significance.
- Gain an understanding of depreciation tax shields and apply this knowledge to influence decisions related to leasing and buying.
- Acquire knowledge on the effect that different tax rates have on the decision to lease or buy.
Verified Answer
RG
Learning Objectives
- Figure out the net positive effect of leasing (NAL) and grasp its significance.
- Gain an understanding of depreciation tax shields and apply this knowledge to influence decisions related to leasing and buying.
- Acquire knowledge on the effect that different tax rates have on the decision to lease or buy.
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