Elon Inc. is a solar battery manufacturer. It would like to lease a specialized equipment...
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Elon Inc. is a solar battery manufacturer. It would like to lease a specialized equipment to make the production of its batteries more efficient. The equipment costs $4,500,000. If purchased, it will be fully depreciated according to the straight-line depreciation method over three years. Because the equipment would be used so much, it will be valueless in three years. Another option that Elon Inc. has is to lease the equipment for $1,650,000 per year for three years from another company, Galaxy Inc., that owns it. Elon Inc. is in the 21 percent income tax bracket. It can borrow at 6 percent pre-tax rate. Calculate Galaxy Inc.'s (i.e., the Lessor's) net advantage to leasing, or NAL. Galaxy Inc. is in the same income tax rate bracket as Elon Inc. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. If you got a negative answer, don't forget to put the minus sign.) NAL $ 70,861.70
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