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

jeff jeffy answered 5 months ago
Next > < Previous

Related Solutions

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...
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...
An asset costs $630,000 and will be depreciated in a straight-line manner over its three-year life....
An asset costs $630,000 and will be depreciated in a straight-line manner over its three-year life. It will have no salvage value. The corporate tax rate is 40 percent, and the appropriate interest rate is 11 percent. What would the lease payment have to be to make both the lessor and lessee indifferent about the lease? Assume that the lessee pays no taxes and the lessor pays taxes. For what range of lease payments does the lease have a positive...
An asset costs $790,000 and will be depreciated in a straight-line manner over its three-year life....
An asset costs $790,000 and will be depreciated in a straight-line manner over its three-year life. It will have no salvage value. The corporate tax rate is 21 percent and the appropriate interest rate is 6 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...
An asset costs $790,000 and will be depreciated in a straight-line manner over its three-year life....
An asset costs $790,000 and will be depreciated in a straight-line manner over its three-year life. It will have no salvage value. The lessor can borrow at 6.2 percent and the lessee can borrow at 8.7 percent. The corporate tax rate is 25 percent for both companies. 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,...
An asset costs $640,000 and will be depreciated in a straight-line manner over its three-year life....
An asset costs $640,000 and will be depreciated in a straight-line manner over its three-year life. It will have no salvage value. The lessor can borrow at 5.5 percent and the lessee can borrow at 7 percent. The corporate tax rate is 23 percent for both companies. a. What lease payment will make the lessee and the lessor equally well off? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. Assume that the...
An asset costs $440,000 and will be depreciated in a straight-line manner over its three-year life....
An asset costs $440,000 and will be depreciated in a straight-line manner over its three-year life. It will have no salvage value. The lessor can borrow at 7.5 percent and the lessee can borrow at 9 percent. The corporate tax rate is 23 percent for both companies. a. What lease payment will make the lessee and the lessor equally well off? b. Assume that the lessee pays no taxes and the lessor is in the 23 percent tax bracket. For...
An asset costs $560,000 and will be depreciated in a straight-line manner over its three-year life....
An asset costs $560,000 and will be depreciated in a straight-line manner over its three-year life. It will have no salvage value. The lessor can borrow at 7.5 percent and the lessee can borrow at 9 percent. The corporate tax rate is 24 percent for both companies. a. What lease payment will make the lessee and the lessor equally well off? b. Assume that the lessee pays no taxes and the lessor is in the 24 percent tax bracket. For...
An asset costs $770,000 and will be depreciated in a straight-line manner over its three-year life....
An asset costs $770,000 and will be depreciated in a straight-line manner over its three-year life. It will have no salvage value. The lessor can borrow at 6 percent and the lessee can borrow at 8.5 percent. The corporate tax rate is 23 percent for both companies. 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,...
An asset costs $750,000 and will be depreciated in a straight-line manner over its three-year life....
An asset costs $750,000 and will be depreciated in a straight-line manner over its three-year life. It will have no salvage value. The lessor can borrow at 5.8 percent and the lessee can borrow at 8.3 percent. The corporate tax rate is 21 percent for both companies. 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,...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT