The after-tax cost of debt is typically used as the discount rate when performing a lease versus buy analysis

The after-tax cost of debt is typically used as the discount rate when performing a lease versus buy analysis. Be prepared to discuss the merits of using this rate versus the weighted average cost of capital. It will be useful to consider the riskiness of cash flows from leasing versus buying by considering the riskiness of cash flows from a typical capital budgeting project.
Should Friendly lease or purchase the transportation equipment? Calculate the Net Advantage to Leasing (PV cost of purchase - PV cost of leasing). Assume that if the decision is made to purchase the equipment, it will be sold for its book value on the first day of year 5, hence the full Year 4 depreciation can be taken. 3. Now assume Victoria wants you to adjust the analysis to reflect differential risk for the residual value. Use a 14% rate to evaluate the residual value and explain why this might be appropriate. What is the new Net Advantage to Leasing (NAL)?