Big Sky Mining Company must install $1.5 million of mew machinery in its Nevada mine.  It can obtain a bank...

Big Sky Mining Company must install $1.5 million of mew machinery in its Nevada mine.  It can obtain a bank loan for 100% of the purchase price, or it can lease the machinery.  Asume that the following facts apply.

1.  The machinery falls into he MACRS 3-year class.

2.  Under either the lease or the purchase, Big Sky must pay for insurance, property taxes and maintenance.

3.  The firm's tax rate is 40%.

4.  The loan would have an interest rate of 15%.

5.  The lease terms call for $400,000 payments at the end of each of the next 4 years.

6.  Big Sky has no use for the machine beyond the expiration of the lease, and the machine has an estimated residual value of $250,000 at the end of the 4th year.

What is the NAL of the lease?