& Bezos is a fresh groceries delivery company. The company has access to borrowing funds at a pre-tax rate of 6 % per year. Jeff & Bezos pays income taxes using 24 % tax rate. The company would like to start using high-speed low-altitude drones to deliver grocery purchases directly to residential customers' backyards. The required fleet of drones costs $6,300,000. If the company chooses to buy them, the drones would be losing their economic value following the straight-line depreciation method during a six year period. The fleet of drones, due to their heavy usage, would have no salvage value in six years. Instead of buying the fleet of the drones, Jeff & Bezos is also contemplating leasing them for an estimated pre-tax annual cost of $1,260,000 for six years from a different company. What should Jeff & Bezos do? Should the company buy or lease the drones? Calculate the net advantage to leasing, a.k.a. NAL, for Jeff & Bezos.
Jeff & Bezos is a fresh groceries delivery company. The company has access to borrowing funds at a pre-tax rate of 6 % per year. Jeff & Bezos pays income taxes using 24 % tax rate. The company would like to start using high-speed low-altitude drones to deliver grocery purchases directly to residential customers' backyards. The required fleet of drones costs $6,300,000. If the company chooses to buy them, the drones would be losing their economic value following the straight-line
Instead of buying the fleet of the drones, Jeff & Bezos is also contemplating leasing them for an estimated pre-tax annual cost of $1,260,000 for six years from a different company. What should Jeff & Bezos do? Should the company buy or lease the drones? Calculate the net advantage to leasing, a.k.a. NAL, for Jeff & Bezos.
(Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. If your answer is negative, don't forget to put the minus sign.)
According to the above calculations, Jeff & Bezos should buy or lease the drones?
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 3 images
