2. Nodhead college needs a new computer. You can either buy it for $250,000 or lease it from compulease. the lease terms require the college to make six annual payments (prepaid) of $55,000. The college space no tax, the leasing company pays tax at 35%. The leasing company can depreciate the computer for tax purposes at a CCA rate of 30%, and will close the asset pool at the end of 60 year. The computer will have no residual value at the end of Year 5 the interest rate is 8%. a. What is the NPV of the lease for the college? b. What is the NPV for the leasing company? c. What is the overall gain from leasing?
2. Nodhead college needs a new computer. You can either buy it for $250,000 or lease it from compulease. the lease terms require the college to make six annual payments (prepaid) of $55,000. The college space no tax, the leasing company pays tax at 35%. The leasing company can depreciate the computer for tax purposes at a CCA rate of 30%, and will close the asset pool at the end of 60 year. The computer will have no residual value at the end of Year 5 the interest rate is 8%. a. What is the NPV of the lease for the college? b. What is the NPV for the leasing company? c. What is the overall gain from leasing?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:2. Nodhead college needs a new computer. You can either buy it for $250,000 or lease it from compulease. the lease terms require the
college to make six annual payments (prepaid) of $55,000. The college space no tax, the leasing company pays tax at 35%. The leasing
company can depreciate the computer for tax purposes at a CCA rate of 30%, and will close the asset pool at the end of 60 year. The
computer will have no residual value at the end of Year 5 the interest rate is 8%. a. What is the NPV of the lease for the college? b. What is
the NPV for the leasing company? c. What is the overall gain from leasing?
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