An asset costs $760,000 and will be depreciated in a straight-line manner over its three-year life. It will have no salvage value. The lessor can borrow at 6.5 percent and the lessee can borrow at 8 percent. The corporate tax rate is 24 percent for both companies.

a.	What lease payment will make the lessee and the lessor equally well off? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Lease payment= _________

b.

Assume that the lessee pays no taxes and the lessor is in the 24 percent tax bracket. For what range of lease payments does the lease have a positive NPV for both parties? (Enter your answers from lowest to highest. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

Answer rating: 100% (QA)

To calculate the lease payment that will make the lessee and the lessor equally well off we will first calculate the lease payment using the formula provided Then we will determine the range of lease ... View the full answer