Your company needs to acquire a new heavy-duty truck, as shown in the picture below, to haul
Question:
Your company needs to acquire a new heavy-duty truck, as shown in the picture below, to haul equipment and supplies to the new LNG terminal being built at Kitimat, BC. The tractor and trailer costs $240,000. Your options are to borrow at an interest rate of 8% (pre-tax) or lease the unit. Neither option will affect revenue. If you lease, the lease payments are $40,000 per year, payable at the beginning of each year, for eight years. If you buy the truck and trailer, you will use a CCA rate of 30%, using the Accelerated Investment Incentive. Initially, assume that both firms have a tax rate of 40%.
At what annual lease payment do the lessee and the lessor both breakeven?
a). $35,258
b). $34,887
c). $36,793
d). $35,927
d). A breakeven payment does not exist
Financial Management for Decision Makers
ISBN: 978-0138011604
2nd Canadian edition
Authors: Peter Atrill, Paul Hurley