You are working for the finance department at ACME Corp. You are acquiring equipment and must decide if it is better to do a financial lease or to borrow and buy.
Initial cost; $1000
MACRS 3 year depreciation (33.33, 44.45, 14.81, 7.41)
Tax rate: 35%
Cost of debt: 6%
Annual lease payment: $250
What is the NPV of the lease relative to the borrow and buy? Please use Excel to find your answer.