SHOW FORMULAS: Use the following information to answer the next two questions:

Daily Enterprises is contemplating the acquisition of some new equipment. The purchase price is $46,000 and will require a maintenance contract of $2,000 at the beginning of each year. The company expects to sell the equipment at the end of year 4 for $5,000. The firm will use MACRS depreciation with a 3-year life. The equipment can be leased for $12,300 a year for 4 years. The firm can borrow money at 7.5 percent and has a 35 percent tax rate.

Lease Financing
6. What is the Net Advantage to Leasing?
Equip Cost		1	2	3	4
Depr. Rate
AT Loan Payment
Depr Tax Shield
Maintenance
Tax on Maintenance
ATSV
Total Cash Flow
NPV-Owning
	0	1	2	3	4
Lease Pmt
Tax Savings
Total Cash Flow
NPV-Leasing
NAL of Lease