Question
Walther Corporation is deciding between purchasing needed equipment or leasing it. If purchased, it has calculated its total expected after-tax cash outflows each year as
Walther Corporation is deciding between purchasing needed equipment or leasing it. If purchased, it has calculated its total expected after-tax cash outflows each year as follows: Year 1 $250,000; Year 2 $225,000; Year 3 $200,000; Year 4 $150,000; and Year 5 $100,000 with annual cash flows assumed to be generated evenly throughout the year (use the mid-year adjustment). If leased, the annual after-tax lease payment of $187,500 would be due at the beginning of each of the next five years. The companys cost of debt is 5%. What is the net advantage to leasing (NAL)? If leasing is more expensive, be certain to place a negative sign before your answer. show work in excel!
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