Question: ZMC Corporation is planning to replace a network with a new Cisco network. ZMC is currently leasing the network for $19,500/month. The leasing company ZMC

ZMC Corporation is planning to replace a network with a new Cisco network. ZMC is currently leasing the network for $19,500/month. The leasing company ZMC works with has configured a replacement network for $500,000, all hardware.

The leasing company uses an equity quote of 15 percent for 24 months and 8 percent for 36 months and finance quotes of 10 percent and 10.5 percent for 24 and 36 months, respectively. The company estimates that the fair market value of the network after 24 and 36 months would be USD 120,000 and USD 80,000, respectively.

• What is the equity insertion for two and three years?
• What is the present value of the two- and three-year leases?
• What would the lease payments be in advance for the two- and three-year leases?
• If the Illinois sales tax rate is 7 percent and ZMC wants to finance the tax for two or three years, how much would it add to the lease payments?

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