Enterprise Capital Leasing Company is in the business of leasing
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...
Answer
Setting the lease payment schedule: Let X denote the annual lease receipt from trac…View the full answer
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