What is the net advantage to leasing

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Reference no: EM131821618

AHS must install a new $1.5 million computer to track patient records in it's multiple service areas. it plans to use the computer for only 3 years, at that time a new systemwill be acquired that will handle both billing and patient records. The company can borrow money at a before-tax cost of 19%. In lieu of buying, AHS could lease the computer for 3 years. Assume the following facts apply; 1.) The computer falls into a 3 year class for 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 companies marginal tax rate is 34% 3.)Tenative 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: EM131821618

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