insurance, and operating expenses. IT Greymare does not own the bus, it cannot depreciate it, and therefore, it gives up a valuable depreciation tax shield. We assume depreciation would be calculated immediately. All payments are in advance, that is, at the start of each year. Greymare's borrowing rate is 9%. Assume this is a financial lease. a. What is the value of the lease if Greymare's marginal tax rate is T = 0.30? b. What would the lease value be if the tax rate is 21%, but for tax purposes, the initial investment had to be written off in equal amounts over years 1 through 5? Note: For all requirements, a negative answer should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers in thousands rounded to 2 decimal places. Answer is complete but not entirely correct. a. Value of the lease $ 6,669.29 thousands b. Value of the lease $ 5,094.91 thousands

insurance, and operating expenses. IT Greymare does not own the bus, it cannot depreciate it, and therefore, it gives up a valuable depreciation tax shield. We assume depreciation would be calculated immediately. All payments are in advance, that is, at the start of each year. Greymare's borrowing rate is 9%. Assume this is a financial lease. a. What is the value of the lease if Greymare's marginal tax rate is T = 0.30? b. What would the lease value be if the tax rate is 21%, but for tax purposes, the initial investment had to be written off in equal amounts over years 1 through 5? Note: For all requirements, a negative answer should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers in thousands rounded to 2 decimal places. Answer is complete but not entirely correct. a. Value of the lease $ 6,669.29 thousands b. Value of the lease $ 5,094.91 thousands

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter19: Lease Financing

Section: Chapter Questions

Problem 2P: Lease versus Buy Consider the data in Problem 19-1. Assume that RCs tax rate is 40% and that the...

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