Jeff & Bezos is a fresh groceries delivery company. The company has access toborrowing funds at a pre-tax rate of 6% per year. Jeff & Bezos pays income taxes using24 % tax rate. The company would like to start using high-speed low-altitude drones todeliver grocery purchases directly to residential customers' backyards. The requiredfleet of drones costs $6,300,000. If the company chooses to buy them, thedrones would be losing their economic value following the straight-line depreciationmethod during a six year period. The fleet of drones, due to their heavy usage, wouldhave 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? Shouldthe company buy or lease the drones?Calculate the net advantage to leasing, a.k.a. NAL, for Jeff & Bezos. (Do not roundintermediate calculations and round your answer to 2 decimal places, e.g., 32.16. Ifyour answer is negative, don't forget to put the minus sign.)NALAccording to the above calculations, Jeff & Bezos shouldLeaseO Buythe drones.

The Net Advantage to Leasing (NAL) statistic compares the costs of leasing an asset to the expenses…

Answered: Calculate the net advantage to leasing,…

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter11: Simulation Models

Section: Chapter Questions

Problem 47P

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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.)