A tax-exempt organization needs a new truck to haul donations to its warehouse. The firm believes, based on its analysis, that this investment adds value. The firm can borrow funds at 4% and buy the truck for $70,000. Alternatively, a lessor offers to lease a truck to the firm on a five-year lease. ABC will pay the lessor $16,000 every year at the beginning of each year. The truck has an estimated pre-tax salvage value of $9,000 after five years.

What is the Net Advantage to Leasing? Should the firm lease?