A firm needs to either buy or lease $200,000 worth of equipment. The equipment has a life of 5 years after which time it will be worthless. The equipment as a CCA rate of 30% and can be leased at a cost of $45,000 per year (payments due at the beginning of each year). The corporate tax rate is 33% and the cost of debt is 10%. What is the present value of the lease payments tax shield? (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit any commas and the $ sign in your response. For example, an answer of $1,000.50 should be entered as 1000.50.) Numeric Response

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
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A firm needs to either buy or lease $200,000 worth of equipment. The equipment has a life of 5 years after which time it will be worthless. The equipment as a CCA
rate of 30% and can be leased at a cost of $45,000 per year (payments due at the beginning of each year). The corporate tax rate
33% and the cost of debt is 10%.
What is the present value of the lease payments tax shield? (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit any commas
and the $ sign in your response. For example, an answer of $1,000.50 should be entered as 1000.50.)
Numeric Response
Transcribed Image Text:A firm needs to either buy or lease $200,000 worth of equipment. The equipment has a life of 5 years after which time it will be worthless. The equipment as a CCA rate of 30% and can be leased at a cost of $45,000 per year (payments due at the beginning of each year). The corporate tax rate 33% and the cost of debt is 10%. What is the present value of the lease payments tax shield? (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit any commas and the $ sign in your response. For example, an answer of $1,000.50 should be entered as 1000.50.) Numeric Response
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