Question
You work for a nuclear research laboratory that is contemplating leasing a diagnostic scanner (leasing is a very common practice with expensive, high-tech equipment). The
You work for a nuclear research laboratory that is contemplating leasing a diagnostic scanner (leasing is a very common practice with expensive, high-tech equipment). The scanner costs $4,000,000 and it would be depreciated straight-line to zero over 4 years. Because of radiation contamination, it will actually be completely valueless in 4 years. You can lease it for $1,400,000 per year for 4 years. Assume the tax rate is 31 percent. You can borrow at 7 percent before taxes. What is the net advantage to leasing (NAL) from your company's standpoint? Multiple Choice
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