Problem:
Apple is considering a leasing arrangement to finance some tools that it needs for the next three years. The tools will be worthless after those three years. Apple will depreciate the cost of the tools on a straight-line basis over their three year life. Apple can borrow $4,800,000, the purchase price, at 10% and buy the tools, or it can make three equal end-of-year lease payments of $2,100,000 each and lease them. The loan obtained from the bank is a three-year simple interest loan, with interest paid at the end of the year. The firm's tax rate is 40%. Annual maintenance costs associated with ownership are estimated at $240,000, but this cost would be borne by the lessor if it leases.
Required:
Question: What is the net advantage to leasing (NAL), in thousands?
Note: Provide support for rationale.