Enterprise Capital Leasing Company is in the business of leasing

Enterprise Capital Leasing Company is in the business of leasing tractors to construction companies. The firm wants to set a three-year lease payment schedule for a tractor purchased at 53,000 from the equipment manufacturer. The asset is classified as a five-year MACRS property. The tractor is expected to have a salvage value of 122,000 at the end of three years' rental. Enterprise will require a lessee to make a security deposit in the amount of $1,500 that is refundable at the end of the lease term. Enterprise's marginal tax rate is 35%. If Enterprise wants an after-tax return of 10%, what lease payment schedule should be set?
Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...