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Jeff & Bezos is a fresh groceries delivery company. The company has access to borrowing funds at a pre - tax rate of 8 %
Jeff & Bezos is a fresh groceries delivery company.The company has access to borrowing funds at a pretax rate of per year. Jeff & Bezos pays income taxes using tax rate.The company would like to start using highspeed lowaltitude drones to deliver grocery purchases directly to residential customers' backyards. By doing so the company would be saving$ million pretax every single year.Jeff & Bezos is contemplating leasing the drones for a lease term that matches the drones' economic life. It would lease them from a different company, Nets & Flicks, that currently owns the required number of the drones. Doing that would have an estimated pretax annual cost of$ Nets & Flicks' requirement isthat the lease payments are made by Jeff & Bezos at thebeginningof each year.Instead of leasing the fleet of the drones, Jeff & Bezos is also contemplating buying them, which would cost the company $ million. If the company chooses to buy them, the drones would be losing their economic value following the straightline depreciation method during theirfiveyear life.The fleet of drones, due to their heavy usage, would have no salvage value at the end.
Jeff and bezos net advantage to leasing or NAL equals
The maximum pre tax lease payment at which jeff bezos would be willing to sign the lease agreement with nets and flicks equals
NAL
Lease payment
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