A travel company is considering obtaining a new boat for tours. It is expected to cost 3,000,000, have a useful life of three years, and sold for 2,000,000 at that time. It will fall into a 25% CCA rate, the firm's tax rate is 40% and its cost of capital is 14%.

The boat builder is offering a lease (rent) alternative. What are the most the travel company would be willing to pay at the end of each of the three years if it decided to lease the boat? (The pre-tax lease payment amount. Hint, calculate the net cost of ownership as a starting point).

a. 586,111

b. 976,851

c. 289,323

d. 1,000,000

Answer rating: 100% (QA)

Net cost of ownership of the new boat Initial Cost 3000000 Remaining value after ... View the full answer