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Scana Corporation is considering leasing a new equipment. The lease lasts for 5 years. The lease...

Scana Corporation is considering leasing a new equipment. The lease lasts for 5 years. The lease calls for 5 payments of $34,000 per year with the first payment occurring immediately. The equipment would cost $126,000 to buy and would be straight-line depreciated to a zero salvage value over 5 years. The actual salvage value is negligible because of technological obsolescence. The firm can borrow at a rate of 6.5%. The corporate tax rate is 25%. What is the NPV of the lease relative to the purchase?

-$9,458.27

-$13,805.76

$21,019.35

-$17,555.12

$16,927.63

Solutions

Expert Solution

Answer:

Correct answer is:

-$13,805.76

Explanation:

Closest option is -$13,805.76.

Hence option 2 is correct and other options 1, 3, 4 and 5 are incorrect.

jeff jeffy answered 10 months ago
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