Witten Entertainment is considering buying a machine that costs $549,000. The machine will be depreciated over...

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Witten Entertainment is considering buying a machine that costs$549,000. The machine will be depreciated over five years by thestraight-line method and will be worthless at that time. Thecompany can lease the machine with year-end payments of $144,000.The company can issue bonds at an interest rate of 6 percent. Thecorporate tax rate is 24 percent.
What is the NAL of the lease? (A negative answer should beindicated by a minus sign. Do not round intermediate calculationsand round your answer to 2 decimal places, e.g., 32.16.)

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3.7 Ratings (378 Votes)

With the buying optioncash outflow in year 0 machine costcash inflow in years 1 to 5 depreciation tax shield See Answer

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Witten Entertainment is considering buying a machine that costs$549,000. The machine will be depreciated over five years by thestraight-line method and will be worthless at that time. Thecompany can lease the machine with year-end payments of $144,000.The company can issue bonds at an interest rate of 6 percent. Thecorporate tax rate is 24 percent.What is the NAL of the lease? (A negative answer should beindicated by a minus sign. Do not round intermediate calculationsand round your answer to 2 decimal places, e.g., 32.16.)