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    Lease vs Purchase (Leasing a New Laser Light)

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    Your firm is considering leasing a new laser light. The lease lasts for 3 years. The lease calls for 4 payments of $10,000 per year with the first payment occurring immediately. The computer would cost $45,000 to buy and would be straight-line depreciated to a zero salvage value over 3 years. The actual salvage value is negligible because of technological obsolescence. The firm can borrow at a rate of 10%. The corporate tax rate is 35%.

    a) What is the after-tax cash flow from leasing relative to the after-tax cash flow from purchasing in years 1-3?
    b) What is the after-tax cash flow from leasing relative to the after-tax cash flow from purchasing in year 0?
    c) What is the NPV of the lease relative to the purchase?

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    https://brainmass.com/business/leasing/lease-purchase-leasing-new-laser-light-441518

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