Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Santher's Trucking Company (STC) is evaluating a potential lease for a truck with a 4-year life that costs $40,000 and falls into the MACRS 3-year
Santher's Trucking Company (STC) is evaluating a potential lease for a truck with a 4-year life that costs $40,000 and falls into the MACRS 3-year class. If the firm borrows and buys the truck, the loan rate would be 8%, and the loan would be amortized over the truck's 4-year life. The loan payments would be made at the end of each year. The truck will be used for 4 years, at the end of which time it will be sold at an estimated residual value of $12,000. If STC buys the truck, it would purchase chonaintenance contract that costs $1.500 per year, payable at the end of each year. The lease terms, which include maintenance, call for a $10,000 lease payment (4 payments total) at the beginning of each year. STC's tax rate is 35%. (Note: MACRS rates for Years 1 to 4 are 0.33, 0.45, 0.15, and 0.07.) What is the Net Advantage to Leasing(25 marks)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started