An asset costs $900,000 and will be depreciated in a straight-line manner over its five-year life. It will have no salvage value. The corporate tax rate is 22 percent and the appropriate interest rate is 9 percent. a. What would the lease payment have to be to make both the lessor and lessee indifferent about the lease? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. Assume that the lessee pays no taxes and the lessor pays taxes. For what range of lease payments does the lease have a positive NPV for both parties? (Enter your answers from lowest to highest. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
An asset costs $900,000 and will be depreciated in a straight-line manner over its five-year life. It will have no salvage value. The corporate tax rate is 22 percent and the appropriate interest rate is 9 percent. a. What would the lease payment have to be to make both the lessor and lessee indifferent about the lease? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. Assume that the lessee pays no taxes and the lessor pays taxes. For what range of lease payments does the lease have a positive NPV for both parties? (Enter your answers from lowest to highest. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter19: Lease Financing
Section: Chapter Questions
Problem 1P: Reynolds Construction (RC) needs a piece of equipment that costs 200. RC can either lease the...
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An asset costs $900,000 and will be depreciated in a straight-line manner over its five-year life. It will have no salvage value. The corporate tax rate is 22 percent and the appropriate interest rate is 9 percent. |
a. |
What would the lease payment have to be to make both the lessor and lessee indifferent about the lease? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
b. | Assume that the lessee pays no taxes and the lessor pays taxes. For what range of lease payments does the lease have a positive |
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