What is net advantage to leasing

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Reference no: EM131687577

AHS must install a new $1.5 million computer to track patients records in its multiple service area. It plans to use the computer for only 3 years, at that time a new system will be acquired that will handle both billing and patient records. The company can borrow money at a before-tax cost of 10%. In liue of buying, AHS could lease the computer for 3 years. Assume the following facts apply: 1. The computer falls into the 3-year class for tax depreciation, so the modified accelerated cost recovery system (MACRS) allowances are 0.33, 0.45, 0.15, and 0.07 in year 1 through 4, respectively. 2. The company's marginal tax rate is 34%. 3. Tentative lease terms call for payments of $500,000 at the beginning of each year. 4. The best estimate for the value of the computer after 4 years of wear and tear is $300,000. What is the net advantage to leasing (NAL)?

Reference no: EM131687577

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