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You are the manager of a sales division, and are considering leasing a fleet of cars for your staff. ...

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You are the manager of a sales division, and are considering leasing a fleet of cars for your staff. ...

You are the manager of a sales division, and are considering leasing a fleet of cars for your staff. You can buy the cars for $300,000 or you can lease them for 8 years at $60,000 per year with payments due at end of each year. The company has a tax rate of 40.0% and a CCA rate of 10.0% on vehicles. If the company buys the cars and finances the purchase with a loan, they will pay 7.0% in interest. Assume that after the term of the lease is over, the salvage value of the cars will be zero. What is the NPV of the lease, based on accelerated investment incentive for CCA in the first year?

▸ -$23,194

▸ -$240,390

▸ -$26,600

▸ $213,790

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Corporate Finance

Edition: 5^th

Author: Booth

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