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What is the year zero incremental cash flow from leasing

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Question 1: A new robotic welder can be leased for 3 years with annual payments of $225,000 with the first payment occurring at lease inception. The system would cost $850,000 to buy and would be depreciated straightline to a zero salvage value over five years. The actual salvage value is expected to be $65,000 at the end of the five years. The firm can borrow at 8 percent and has a tax rate of 21 percent. What is the Year 0 incremental cash flow from leasing instead of buying?

Group of answer choices

Option 1: $1,027,750

Option 2: $695,000

Option 3: $672,250

Option 4: $748,500

Option 5: $684,750

Reference no: EM132600453

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