You work for a nuclear research laboratory that is contemplating leasing a diagnostic scanner (leasing is...

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You work for a nuclear research laboratory that is contemplatingleasing a diagnostic scanner (leasing is a common practice withexpensive, high-tech equipment). The scanner costs $5,900,000 andwould be depreciated straight-line to zero over five years. Becauseof radiation contamination, it will actually be completelyvalueless in five years. You can lease it for $1,450,000 per yearfor five years. Assume that the tax rate is 25 percent. You canborrow at 8 percent before taxes. Calculate the NAL. (Do not roundintermediate calculations and round your answer to 2 decimalplaces, e.g., 32.16.) Should you lease or buy? Lease or Buy?

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SolutionThe net advantage to leasing NAL 7640706The scanner should be Leased as the See Answer

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You work for a nuclear research laboratory that is contemplatingleasing a diagnostic scanner (leasing is a common practice withexpensive, high-tech equipment). The scanner costs $5,900,000 andwould be depreciated straight-line to zero over five years. Becauseof radiation contamination, it will actually be completelyvalueless in five years. You can lease it for $1,450,000 per yearfor five years. Assume that the tax rate is 25 percent. You canborrow at 8 percent before taxes. Calculate the NAL. (Do not roundintermediate calculations and round your answer to 2 decimalplaces, e.g., 32.16.) Should you lease or buy? Lease or Buy?