A lease with a term of 4 years calls for annual payments of $3,400. The leased asset would cost $11,300 to buy and would be depreciated straight-line to a zero salvage value over the 4 years. The actual salvage value is negligible. The firm can borrow at a rate of 6 percent. What is the NPV of the lease relative to the purchase if the lessee's tax rate is 21 percent? X -$1.699
A lease with a term of 4 years calls for annual payments of $3,400. The leased asset would cost $11,300 to buy and would be depreciated straight-line to a zero salvage value over the 4 years. The actual salvage value is negligible. The firm can borrow at a rate of 6 percent. What is the NPV of the lease relative to the purchase if the lessee's tax rate is 21 percent? X -$1.699
Chapter19: Lease And Intermediate-term Financing
Section: Chapter Questions
Problem 9P
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Question
![A lease with a term of 4 years calls for annual payments of $3,400. The leased asset would cost $11,300 to buy and would be depreciated straight-line to a zero salvage value
over the 4 years. The actual salvage value is negligible. The firm can borrow at a rate of 6 percent. What is the NPV of the lease relative to the purchase if the lessee's tax rate is
21 percent?
X
-$1,699
$197
-$399
-$194
$23,107](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F6dc160e3-dc15-4147-93b6-7b41314c664a%2Fe4fcd199-76ad-4a59-b8b3-1fc799706b64%2Fzns0a6w_processed.jpeg&w=3840&q=75)
Transcribed Image Text:A lease with a term of 4 years calls for annual payments of $3,400. The leased asset would cost $11,300 to buy and would be depreciated straight-line to a zero salvage value
over the 4 years. The actual salvage value is negligible. The firm can borrow at a rate of 6 percent. What is the NPV of the lease relative to the purchase if the lessee's tax rate is
21 percent?
X
-$1,699
$197
-$399
-$194
$23,107
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