Question: COMM Leasing Company has been asked by a GPG Engineering to quote on a 5-year lease for critical plant and equipment with a cost of

COMM Leasing Company has been asked by a GPG Engineering to quote on a 5-year lease for critical plant and equipment with a cost of $750,000. The equipment can be depreciated for tax purposes over 5 years. The plant and equipment has a residual value equal to 10% of the original cost of the equipment and is to be received at the end of the lease period.

COMM Leasing Company pays tax at 30% and requires a return of 14% per annum after tax from its leasing business.

All lease payments are received in advance, at the start of the year - (annuity due).

Required:

What is the minimum annual lease payment that COMM Leasing Company should quote GPG Engineering?

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