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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 what range of lease payments does the lease have a positive NPV for both parties?

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SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

jeff jeffy answered 1 year ago
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