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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. Doing so would bring the company pretax savings in the amount of $ million each year.
The required fleet of drones costs $ million. If the company chooses to buy them, the drones would be losing their economic value following the straightline depreciation method during a five year period. The fleet of drones, due to their heavy usage, would have no salvage value at the end.
Instead of buying the fleet of the drones, Jeff & Bezos is also 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. The estimated annual pretax cost of leasing would be $ Nets & Flicks requires that the lease payments are made by Jeff & Bezos at the beginning of each year. One additional requirement is that Jeff & Bezos pays a $ security deposit when the lease agreement is being signed, and at the end of the lease term Nets & Flicks promises to give the deposit back to Jeff & Bezos.
When the security deposit is also taken into account, Jeff & Bezos' net advantage to leasing, or NAL, equals Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to decimal places, eg
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