What is the net advantage to leasing for project

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A company is looking to add an new machinery. It will cost $5,000,000 if purchased; It would be depreciated straight-line to zero salvage over 5 years. Alternatively, it may be leased for $600,000 per year. The firm’s cost of debt is 6%, and its tax rate is 40%.

Questions:

a) What’s the lease cash flow?

b) What is the net advantage to leasing (NAL) for the following project?

b) What decision should be made?

Reference no: EM131502759

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