Asked by
Afsar Shasaltaneh
on Dec 08, 2024
Verified
Your company is considering the purchase of a fleet of cars for $195,000. It can borrow at 8.5%. The cars will be used for four years. At the end of four years they will be worthless. You call a leasing agent and find that the cars can be leased for $55,000 per year. The corporate tax rate is 34% and the cars belong in CCA class 10 (a 30% class) , what is the net advantage to leasing?
A) $6,594
B) $9,988
C) $10,134
D) $15,363
E) $21,802
Corporate Tax Rate
The corporate tax rate is the percentage of a corporation's income that it pays in taxes to the government.
CCA Class 10
A category under the Canadian Capital Cost Allowance that pertains to specific types of property with a depreciation rate set by the tax code.
Net Advantage
The total benefits minus the total costs of an investment or decision, used to determine its overall value or utility.
- Analyze the impact of lease versus purchase decisions on corporate cash flows using given financial parameters.
- Calculate the net advantage to leasing (NAL) for various assets considering tax rates, depreciation, interest rates, and lease payments.
Verified Answer
JT
Learning Objectives
- Analyze the impact of lease versus purchase decisions on corporate cash flows using given financial parameters.
- Calculate the net advantage to leasing (NAL) for various assets considering tax rates, depreciation, interest rates, and lease payments.