An asset costs $600,000 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 6.5 percent and the lessee can borrow at 8 percent. The corporate tax rate is 21 percent for both companies. a. What lease payment will make the lessee and the lessor equally well off? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Lease payment $ 232,653.28 b. Assume that the lessee pays no taxes and the lessor is in the 21 percent tax bracket. For what range of lease payments does the lease have a positive NPV for both. parties? (Enter your answers from lowest to highest. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Lease payment to
An asset costs $600,000 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 6.5 percent and the lessee can borrow at 8 percent. The corporate tax rate is 21 percent for both companies. a. What lease payment will make the lessee and the lessor equally well off? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Lease payment $ 232,653.28 b. Assume that the lessee pays no taxes and the lessor is in the 21 percent tax bracket. For what range of lease payments does the lease have a positive NPV for both. parties? (Enter your answers from lowest to highest. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Lease payment to
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:An asset costs $600,000 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 6.5 percent and the
lessee can borrow at 8 percent. The corporate tax rate is 21 percent for both companies.
a. What lease payment will make the lessee and the lessor equally well off? (Do not
round intermediate calculations and round your answer to 2 decimal places, e.g.,
32.16.)
Lease payment
$
232,653.28
b. Assume that the lessee pays no taxes and the lessor is in the 21 percent tax bracket.
For what range of lease payments does the lease have a positive NPV for both.
parties? (Enter your answers from lowest to highest. Do not round intermediate
calculations and round your answers to 2 decimal places, e.g., 32.16.)
Lease payment
to
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