Question

In: Finance

An asset costs $950,000 and will be depreciated in a straight-line manner over its four-year life....

An asset costs $950,000 and will be depreciated in a straight-line manner over its four-year life. It will have no salvage value. The corporate tax rate is 22 percent and the appropriate interest rate is 8 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.)

Solutions

Expert Solution

ANSWER : A: BREAK EVEN LEASE PAYMENT =286436.11

ANSWER : B: RANGE : 286436.11 TO 286824.76

jeff jeffy answered 8 months ago
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