Use the following information for the last 4 questions: (complete the lease / buy analysis spreadsheet to help answer the questions).

Carmichael Cleaners needs a new steam finishing machine that costs $100,000. The company is evaluating whether it should lease or purchase the machine. The equipment falls into the MACRS 5-year class, and it would be used for 4 years and then sold, because the firm plans to move to a new facility at that time. The estimated value of the equipment after 4 years is $10,000. A maintenance contract on the equipment would cost $3,000 per year, payable at the end of each year. Alternatively, the firm could lease the equipment for 4 years for a lease payment of $29,000 per year, payable at the beginning of each year. The lease would include maintenance costs. The firm is in the 25% tax bracket, and it could obtain debt at a before-tax cost of 8%. If there is a positive Net Advantage to Leasing the firm will lease the equipment. Otherwise, it will buy it. (Note: Assume MACRS rates for Years 1 to 4 are 0.2, 0.32, 0.19.2, and 0.1152.)

What is the NAL?

What is the after-tax cash flow effect of selling the machine at the end of year 4?

What is the difference in cash flow at inception (Buying Cash flow compared to Leasing Cash flow) - ignore cash inflow of any external debt on the buy side?

What is the after-tax debt rate that should be used to perform the lease / buy analysis?