An asset costs $830,000 and will be depreciated in a straight-line manner over its four- year life. It will have no salvage value. The corporate tax rate is 25 percent and the appropriate interest rate is 6 percent. a. What would the lease payment have to be to make both the lessor and lessee indifferent about the lease? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. Assume that the lessee pays no taxes and the lessor pays taxes. 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.) a. Lease payment b. Lease payment range to
An asset costs $830,000 and will be depreciated in a straight-line manner over its four- year life. It will have no salvage value. The corporate tax rate is 25 percent and the appropriate interest rate is 6 percent. a. What would the lease payment have to be to make both the lessor and lessee indifferent about the lease? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. Assume that the lessee pays no taxes and the lessor pays taxes. 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.) a. Lease payment b. Lease payment range to
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
Related questions
Question
100%
Please answer fast I give you upvote.
![**Asset Lease Payment Calculation**
An asset costs $830,000 and will be depreciated in a straight-line manner over its four-year life. It will have no salvage value. The corporate tax rate is 25 percent and the appropriate interest rate is 6 percent.
**Questions:**
a. What would the lease payment have to be to make both the lessor and lessee indifferent about the lease? *Do not round intermediate calculations and round your answer to 2 decimal places (e.g., 32.16).*
b. Assume that the lessee pays no taxes and the lessor pays taxes. 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).*
**Answer Boxes:**
a. Lease payment: [Input Box]
b. Lease payment range: [Input Box] to [Input Box]](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fd789b8b1-9579-4fbd-b192-1d0f61eccfe1%2F9c744e30-0ae4-43d6-aac9-b6f7187ed5cf%2F80ud2aa_processed.jpeg&w=3840&q=75)
Transcribed Image Text:**Asset Lease Payment Calculation**
An asset costs $830,000 and will be depreciated in a straight-line manner over its four-year life. It will have no salvage value. The corporate tax rate is 25 percent and the appropriate interest rate is 6 percent.
**Questions:**
a. What would the lease payment have to be to make both the lessor and lessee indifferent about the lease? *Do not round intermediate calculations and round your answer to 2 decimal places (e.g., 32.16).*
b. Assume that the lessee pays no taxes and the lessor pays taxes. 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).*
**Answer Boxes:**
a. Lease payment: [Input Box]
b. Lease payment range: [Input Box] to [Input Box]
Expert Solution
Step 1: Analysis of given data
Here,
The cost of Asset is $830,000
The depreciation Method is a straight-line methodife of Asset is 4 years
Borrowing Rate is 6%
Tax Rate is 25%
Step by step
Solved in 3 steps with 2 images
Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education