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Manal Elkhoshkhany, Tutor
Category: Homework
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Dakota Trucking Company (DTC) is evaluating a potential lease

Dakota Trucking Company (DTC) is evaluating a potential lease for a truck with a 4-year life that costs \$40,000 and falls into the MACRS 3-year class. If the firm borrows and buys the truck, the loan rate would be 10%, and the loan would be amortized over the truck’s 4-year life, so the interest expense for taxes would decline over time.

The loan payments would be made at the end of each year. The truck will be used for 4 years, at the end of which time it will be sold at an estimated residual value of \$10,000. If DTC buys the truck, it would purchase a maintenance contract that costs \$1,000 per year, payable at the end of each year.

The lease terms, which include maintenance, call for a \$10,000 lease payment (4 payments total) at the beginning of each year. DTC's tax rate is 40%.

Should the firm lease or buy?

What is the Net Advantage of Leasing (if any)?

(Note: MACRS rates for Years 1 to 4 are 0.33, 0.45, 0.15, and 0.07.)
Hi

Regards

Linda
Customer: replied 5 years ago.
Thursday the 29th
I will post the solution before the deadline.

Regards

Linda

lilowa

Is this the full data for the question? Aren't you given the cash flows If DTC buys the truck?

Customer: replied 5 years ago.

This is the full data for the question, nothing has been missed

Thanks

Thank you :)

http://www.box.com/s/31bb6de247e847fb7ede

Regards,

Manal Elkhoshkhany, Tutor
Category: Homework
Satisfied Customers: 9863
Experience: More than 5000 online tutoring sessions.
Customer: replied 5 years ago.

Dear,

Thank you so much for your answer, would you explain how did you get the

NAL = \$997

if you send the answer in excel sheet that would be much better

THANKS

Customer: replied 5 years ago.