Delamont Transport Company (DTC) is evaluating the merits of leasing versus purchasing a truck with a 4-year life that costs $40,000 and falls into the MACRS 3-year class. If the firm borrows and buys the truck, the loan rate would be 10%, and the loan would be amortized over the truck's 4-year life. The loan payments would be made at the end of each year. The truck will be used for 4 years, at the end of which time it will be sold at an estimated residual value of $10,000. If DTC buys the truck, it would purchase a maintenance contract that costs $1,000 per year, payable at the end of each year. The lease terms, which include maintenance, call for a $10,000 lease payment (4 payments total) at the beginning of each year. DTC's tax rate is 40%. (Note: MACRS rates for Years 1 to 4 are 0.3333, 0.4445, 0.1481, and 0.0741).

Question: How much is the principal repayment on the loan in Year 2?

	a.	$10,000
	b.	$9,481
	c.	$9,692
	d.	$9,144

Question: How much is the after-tax interest payment on the loan in Year 3?

	a.	$2,190
	b.	$3,138
	c.	$1,883
	d.	$1,314

Question: How much is the depreciation tax savings in Year 1?

	a.	$5,333
	b.	$7,112
	c.	$13,332
	d.	$2,964

Question: How much is the Year 4 net cash costs if the truck is financed with debt?

a.

$11,5743

b.

$6,286

c.

-$1,574

-$5,574

Question: What is the net advantage to leasing (NAL)?

	a.	-$1,199
	b.	$1,199
	c.	$999
	d.	-$2,074