valesquez ranches inc wishes to use a new truck fueled by compressed natural gas tha 704926

Valesquez Ranches, Inc., wishes to use a new truck fueled by compressed natural gas that costs $80,000. The ranch intends to operate the truck for five years, at the end of which time it is expected to have a $16,000 residual value. Assume that the asset falls in the three year property class for modified accelerated cost recovery (depreciation) purposes, and that Valesquez Ranches is in a 30 percent tax bracket. Two means of financing the new truck are available. A five year, “net lease” arrangement calls for annual lease payments of $17,000, payable in advance. A debt alternative carries an interest cost of 10 percent. Debt payments will be made at the start of each of the five years using a mortgage type of debt amortization. Using the present value of cash outflows method, determine the best financing alternative.