EE company needs to invest in a new equipment. The life expectancy of the equipment is...

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EE company needs to invest in a new equipment. The life expectancy of the equipment is five years. You can purchase it for an upfront cost of $240,000, or you can lease it from the manufacturer for five years for a monthly lease payment of $5000 (paid at the end of each month). Your firm can borrow at EAR of 8%. a) What is the monthly discount rate? b) What is the PV of leasing the equipment? EE company needs to invest in a new equipment. The life expectancy of the equipment is five years. You can purchase it for an upfront cost of $240,000, or you can lease it from the manufacturer for five years for a monthly lease payment of $5000 (paid at the end of each month). Your firm can borrow at EAR of 8%. a) What is the monthly discount rate? b) What is the PV of leasing the equipment?

Answer rating: 100% (QA)

a To calculate the monthly discount rate r we need to convert the annual ... View the full answer