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Nick Warf, the company president, has found a vendor for theequipment. Clapton Acoustical Equipment has offered to sell WarfComputers the necessary equipment at a price of $4 million. Becauseof the rapid development of new technology, the equipment falls inthe three-year MACRS depreciation class. At the end of four years,the market value of the equipment is expected to be $480,000.Alternatively, the company can lease the equipment from HendrixLeasing. The lease contract calls for four annual payments of$1,040,000, due at the beginning of the year. Additionally, WarfComputers must make a security deposit of $240,000 that will bereturned when the lease expires. Warf Computers can issue bondswith a yield of 11 percent, and the company has a marginal tax rateof 35 percent.1. Calculate the NAL (Net Advantage to Leasing).