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Your rental company wants to purchase a new car for its car rental business. The car costs $20,000. It will be obsolete in three years.
Your rental company wants to purchase a new car for its car rental business. The car costs $20,000. It will be obsolete in three years. Your options are to borrow the money at 10% or lease the car. If you lease it, the payments will be $7,500 per year, payable at the beginning of each year. If you buy the car, you can apply a CCA rate of 30% per year. The tax rate is 35%.Assume that the car has projected salvage value of $700 and the asset pool is closed, what would be NAL. Should you buy or lease? Why?
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