Annual pretax cost savings

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Whether to lease or buy? New system will provide $2.7 million in annual pretax cost savings. It costs $9.4 million depreciated straight-line to zero over 5 years. Tax rate is 34 percent, and borrow rate is 9 percent. Lease can be done for $2.5 million per year and made at begining of year. What is the NAL and what is the maximum lease payment that would be acceptable?

Reference no: EM13876221

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