aitel alternative gets a $3,0U AFTER-TAX CASH FLOWS Now that we have discussed a

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aitel alternative gets a $3,0U AFTER-TAX CASH FLOWS Now that we have discussed a number of tax that affect the financial attractiveness of alternati ready to incorporate them into the comparison tives. A common decision that must be comparedea- of alterna- after-tax basis is the comparison of leasing a vehicle purchasing a vehicle. In the next example, we compare t alternatives of obtaining a vehicle: the purchase of the cle using cash, the purchase of the vehicle through fina and leasing the vehicle with an operating lease. vehi- ncing Example 18-6 Your S corporation needs a new truck for its operations and is looking at three alternatives. The first alternative is to lease the truck for 60 months. The monthly lease payment is $525 per month with the first payment due in April. At the end of the lease, the truck will be re- turned to the dealer. The lease is considered an operat- ing lease and excludes all maintenance and operational costs. The second alternative is to purchase the truck with a 60-month loan at an interest rate of 9% (APY 9.38). The loan has $250 in origination fees. The truck's entire sale

Explanation / Answer

Amount PV factor Present value Interest 6487.5 10.73962 69673 Principal 259500 0.59726 154989 Issue price 224662 Note: Final answer might vary + 1

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