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Greencore Corporation is considering leasing a new equipment. The lease lasts for 8 years. The lease...

Greencore Corporation is considering leasing a new equipment. The lease lasts for 8 years. The lease calls for 8 payments of $225,000 per year with the first payment occurring immediately. The equipment would cost $1,480,000 to buy and would be straight-line depreciated to a zero salvage value over 8 years. The firm can borrow at a rate of 6%. The corporate tax rate is 25%. The actual pre-tax salvage value is $36,000. What would the NPV of the lease relative to the purchase be?

-$11,256.91

$12,406.34

-$7,189.01

$8,814.23

-$9,605.78

Solutions

Expert Solution

Correct answer: -$7,189.01

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

Cell reference -

jeff jeffy answered 2 years ago
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