The Wildcat Oil Company is trying to decide whether to lease or buy a new computer-assisted drilling system for its oil exploration business. Management has decided that it must use the system to stay competitive; it will provide $2.2 million in annual pretax cost savings. The system costs $8.9 million and will be depreciated straight-line to zero over 5 years. Wildcat's tax rate is 34 percent, and the firm can borrow at 9 percent. Lambert Leasing Company has offered to lease the drilling equipment to Wildcat for payments of $2.31 million per year. Lambert's policy is to require its lessees to make payments at the start of the year.
What is the NAL for Wildcat?
What is the Lease payment?