Izik industries is negotiating a lease on a new piece of equipment, which would cost $200,000 if purchased. The equipment falls into the MACRS 3-year class (0.33, 0.45, 0.15, 0.07). It would be used for 3 years and then sold because the company plans to move to a new facility at that time. It is estimated that the equipment could be sold for $50,000 after 3-years of use. A maintenance contract on the equipment would cost $4,000 per year, payable at the end of each of the 3 years of use. Alternatively, the company believes it is possible to obtain a lease contract for the equipment for 3 years at the rate of $43,000 per year, payable at the end of each year. Lease payment will include maintenance fee. This firm is in the 40 percent tax bracket, and it could obtain a 3-year amortized loan to purchase the equipment at a before-tax cost of 10%. What is the accumulated depreciation for this equipment up to the third year (i.e. total depreciation for Years 1, 2, and 3)?

2.) From the loan amortization schedule, how much interest payment is due in the SECOND year?

3.) For the BUY option, what is the final cash flow for YEAR 1, i.e. after accounting for loan repayment?

4.) For the BUY option, what is the final cash flow for YEAR 3, i.e. after considering loan repayment and salvage value adjustments?

5.) The NPV of the cost of the BUY option is

6.) The net advantage to leasing (NAL) is:

7.) From the standpoint of the Lessor, the breakeven lease payment, assuming a WACC of 12% is: