Final answer:
The Net Advantage to Leasing (NAL) for Deep Lake Drilling (DLD) would be calculated by comparing the present value of costs associated with leasing versus buying, considering tax shields from CCA, borrowing costs, and other relevant cash flows. A detailed financial model, which includes multiple factors such as purchase price, lease payments, tax benefits, and equipment's useful life, would be necessary to compute the exact NAL figure.
Step-by-step explanation:
The Net Advantage to Leasing (NAL) for Deep Lake Drilling (DLD) is calculated by comparing the cost of leasing the equipment with the cost of purchasing it, taking into account tax shields from Capital Cost Allowance (CCA), the borrowing cost, and any other relevant cash flows over the equipment's useful life. The calculation involves determining the present value of leasing and buying costs, and then finding the difference between the two. These cash flows should be discounted at the opportunity cost of capital, which in this case could be the borrowing rate of 7%. A detailed financial analysis considering the lease payments, tax benefits, and salvage value of the equipment at the end of its useful life would lead to an estimation of the NAL.
To provide an accurate answer, a financial model with the following inputs would be needed: the purchase price, the lease payments, the CCA rate, tax rate, borrowing rate, and the equipment's useful life. A table format can be used to illustrate the yearly cash flows, tax shields, and the present value of these amounts, both for leasing and buying. By calculating and comparing these present values, the NAL can be derived. However, without the specific cash flow structure or salvage value, it is not possible to provide an exact figure for the NAL in this scenario.