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The Wildcat Oil Company is trying to decide whether to lease or buy a new computer-assisted...

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 $3.1 million in annual pretax cost savings. The system costs $7.2 million and will be depreciated straight-line to zero over five years. Wildcat's tax rate is 21 percent, and the firm can borrow at 8 percent. Lambert Leasing Company has offered to lease the drilling equipment to Wildcat for payments of $1.65 million per year. Lambert's policy is to require its lessees to make payments at the start of the year. Suppose Lambert requires Wildcat to pay a $300,000 security deposit at the inception of the lease. Calculate the NAL with the security deposit

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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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