Henderson Corporation is considering a three year finacial lease for a manuafacturing equipment. The cost of the equipment, CCA tax shiels, and after-tax lease payments are shown in the table below. Ignore the salvage value. Assume the firm could borrow at 12% and faces a 30% marginal tax rate.

Year: Incremental cash flows

0 $110,000

1 -$50,000

2 -$45,000

3 -$12,000

1. What is the value of the equivalant loan?

2. What is the NPV value of the lease?

Answer rating: 100% (QA)

1To find the equivalent loan we need to calculate the present value of the aftertax lease payme... View the full answer