Fran's Business has two options: (A) lease a $60,000 machine over a five-year period with an annual
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Question:
Fran's Business has two options:
(A) lease a $60,000 machine over a five-year period with an annual lease payment of $14,000;
(B) borrow $60,000 amount from the bank over the five-year period to buy the asset. The bank would charge a 9% interest.
Other financial assumptions are:
(a) the company's income tax rate is 30%;
(b) the capital cost allowance for the equipment is an even $12,000 per year;
(c) the equipment has no residual value;
What is the 5 year NPV of all after-tax lease payments, using a discount rate of 15% (a negative number)?
Related Book For
Financial Markets And Institutions
ISBN: 978-0132136839
7th Edition
Authors: Frederic S. Mishkin, Stanley G. Eakins
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