Problem: Answer the following questions for a firm in the 40% corporate tax bracket, using straight-line, five year depreciation on an item purchased for $10,000 with no salvage value at the end of its useful life.
A). What is the depreciation amount each year?
B). What is the total depreciation tax savings?
C). If the lease cost was $ 2,000 per year what would be the net advantage to leasing?