Dakota trucking company is evaluating a potential lease for a truck

“Dakota Trucking Company (DTC) is evaluating a potential lease for a truck with a 4-year life that costs $40,000 and falls into the MACRS 3-year class. If the firm borrows and buys the truck, the loan rate would be 10%, and the loan would be amortized over the truck’s 4-year life, so the interest expense for taxes would decline over time.

The loan payments would be made at the end of each year. The truck will be used for 4 years, at the end of which time it will be sold at an estimated residual value of $10,000. If DTC buys the truck, it would purchase a maintenance contract that costs $1,000 per year, payable at the end of each year.

The lease terms, which include maintenance, call for a $10,000 lease payment (4 payments total) at the beginning of each year. DTC’s tax rate is 40%.

Should the firm lease or buy?

What is the Net Advantage of Leasing (if any)?”     

Need your ASSIGNMENT done? Use our paper writing service to score better and meet your deadline.


Click Here to Make an Order Click Here to Hire a Writer