BI Inc. requires an equipment that costs $8,000,000 and will be utilized by the company for...

 

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BI Inc. requires an equipment that costs $8,000,000 and will be utilized by the company for 5 years. The lease rental is $1,700,000 payable at the end of each year. Calculate the present value of outflow of the lease option if WDV depreciation is at 15%, the tax rate 30%, and the discount rate used by the company is 11%. BI Inc. requires an equipment that costs $8,000,000 and will be utilized by the company for 5 years. The lease rental is $1,700,000 payable at the end of each year. Calculate the present value of outflow of the lease option if WDV depreciation is at 15%, the tax rate 30%, and the discount rate used by the company is 11%.

Answer rating: 100% (QA)

SOLUTION To calculate the present value of the lease option we need to find the present value of the lease payments and the tax shield from depreciati... View the full answer