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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 actual salvage value is negligible because of technological obsolescence. The firm can borrow at a rate of 6%. The corporate tax rate is 25%. The corporate tax rate is 25%. What is the NPV of the lease relative to the purchase?

$17,412.66

$11,796.99

-$8,564.23

-$12,194.86

$8,649.72

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Expert Solution

Correct answer: $11,796.99

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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