Fun in the Sun, Inc. is contemplating either leasing or buying a new airplane. The lease payments would be $3.5 million a year for three years. The purchase price is $8.0 million. The equipment will be depreciated over 10 years and then is expected to have no resale value. The firm uses straight-line depreciation, borrows money at 8%, and has a 20% tax rate. What is the net benefit of leasing? Should Fun in the Sun, Inc. buy or lease the plane and why?

ANSWER: Net Benefit Lease = $146,077 + Explanation

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