Asked by Hadeel Damra on Jul 03, 2024
Verified
Consider the following information: original investment = $1,900,PV of CCA tax shield = $1,000,PV of after-tax lease payments = $900.What is the NAL?
A) $2,550
B) $1,650
C) $0.00
D) -$350
PV Of CCA Tax Shield
The present value of the reduction in taxes payable by a firm due to the depreciation expenses claimed on its capital assets.
PV Of After-Tax Lease Payments
The present value of lease payments after accounting for taxes, used to evaluate the financial cost or benefit of leasing.
Original Investment
The initial amount of money put into a project, asset, or venture.
- Evaluate the Net Profit of Leasing (NAL) under precise operational and financial scenarios.
Verified Answer
Therefore, NAL = $900 - $1,000 - $1,900 = -$1,100.
Since NAL is negative, the best choice is not to lease. Thus, option C is the only correct choice.
Learning Objectives
- Evaluate the Net Profit of Leasing (NAL) under precise operational and financial scenarios.
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