Answer Happy

You work for a nuclear research laboratory that is contemplating leasing a diagnostic scanner (leasing is a very common practice with expensive, high-tech equipment). The scanner costs $5,000,000. Because of radiation contamination, it actually will be completely valueless in four years. You can lease it for $1,490,000 per year for four years. Assume that the tax rate is 22 percent. You can borrow at 8 percent before taxes. Assume that the scanner will be depreciated as three-year property under MACRS. Use Table 10.7. Check my a. What is the NAL of the lease? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. Should you lease or buy? a. b. NAL Table 10.7 Modified ACRS Depreciation Allowances Year 1 2 3 4 5 6 7 8 Property Class Three-Year 33.33% 44.45 14.81 7.41 Five-Year 20.00% 32.00 19.20 11.52 11.52 5.76 Seven-Year 14.29% 24.49 17.49 12.49 8.93 8.92 8.93 4.46