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An asset costs $890,000 and will be depreciated in a straight-line manner over its four-year life....

An asset costs $890,000 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 21 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?

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? (

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jeff jeffy answered 7 months ago
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