Possible Answers

PV of CCA Tax Sheild (4895.77, 4451.21, 5123.19)

PV of After Tax Maintencance Costs (481.84, 0, 712.50)

PV of Residual Value (3537.43, 2299.33, 3316.00)

(more, less)

(more, less)

2. Evaluation by the lessee Aa Aa Allied Logistics Ltd. is considering leasing new computer equipment that will cost $20,000 (including shipping and installation). The lease payment is $4,000 per year for four years, paid at the beginning of each year. Other information pertaining to the equipment and lease is as follows: Maintenance of $200 per year will be paid by the lessor. Allied's tax rate is 35%. CCA rate on the equipment is 30%. Allied's cost of borrowing is 4.8%. Estimated residual value of the equipment at the end of 4 years is expected to be $4,000 Based on the preceding information, complete the following table: Value $9,937.45 Present value of the after-tax lease payments Present value of the CCA tax shield Present value of the after-tax maintenance costs Present value of the residual value enanc costs The present value of the CCA tax shield makes leasing the equipment The present value of the after-tax maintenance costs makes leasing the equipment What is the Net Advantage to Leasing (NAL) for Allied Logistics Ltd. valuable to Allied Logistics valuable to Allied. O $1,883.77 O $920.09 O $1,062.17