Lease Versus Buy LEASE After-tax Lease Payment=25000(1T) Lost Depreciation tax shield=Dep(T) Maintenance cost saving=Maint.Cost(1-T) Avoidance of upfront cost Loss of after-tax salvage value in year 5 Total Cash ows of leasing versus buying Cost of Lease After-tax cost of borrowing Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 ($15,000) ($15,000) ($15,000) ($15,000) ($15,000) ($13,332) ($17,770) ($5,920) ($2,904) 5 - $1,200 $1,200 $1,200 $1,200 $1,200 $100,000 ($10,000) $100,000 ($27,132) ($31,570) ($19,720) ($16,764) ($31,000) 8.70% 6%