Calculate Nets & Flicks's (=Lessor) net advantage to leasing, a.k.a. NAL. (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.)
Calculate Nets & Flicks's (=Lessor) net advantage to leasing, a.k.a. NAL. (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.)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Jeff & Bezos is a fresh groceries delivery company. The company has access to
borrowing funds at a pre-tax rate of 6 percent per year. Jeff & Bezos pays income taxes
using 21% 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 $6,000,000. 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
$1,200,000 for six years from a different company, Nets & Flicks, that owns the required
number of drones. Nets & Flicks is in the same tax bracket as Jeff & Bezos.
Calculate Nets & Flicks's (-Lessor) net advantage to leasing, a.k.a. NAL. (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
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