In: Finance
The Wildcat Oil Company is trying to decide whether to lease or buy a new computer-assisted drilling system for its oil exploration business. Management has decided that it must use the system to stay competitive; it will provide $3.2 million in annual pretax cost savings. The system costs $9.9 million and will be depreciated straight-line to zero over its five-year life, after which it will be worthless. Wildcat's tax rate is 24 percent and the firm can borrow at 8 percent. Lambert Leasing Company has offered to lease the drilling equipment to Wildcat for payments of $2,130,000 per year. Lambert's policy is to require its lessees to make payments at the start of the year. |
What is the NAL for Wildcat? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89.) |
What is the maximum lease payment that would be acceptable to Wildcat? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89.) |