Question: A firm decides to enter into a lease agreement The
A firm decides to enter into a lease agreement. The lease term is four years, while the economic life of the asset is five years. The annual lease payment is $10,000 at the beginning of each year, and the appropriate discount rate is 8 percent. There is no salvage value at the end of the lease. The lessee uses the straight-line depreciation method. Estimate the NPV of the lease payments. Estimate the change in NI, CFO, and CFF at the end of the first year.
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