Pele Corp. is a professional leasing company. The leasing manager has to evaluate some lease agreements under the following conditions: • The company’s marginal federal-plus-state income tax rate is 30%. • The company has alternative investment options of similar risk that yield 5.50%. Assuming all other factors and values are constant among these leases, from the lessor’s perspective, which of the following is the best lease? A lease that generates an after-tax rate of return of 2.75%. A lease that has an NPV of –$120,000. A lease that has an IRR of 3.05%. A lease that has an MIRR of 4.45%.
Pele Corp. is a professional leasing company. The leasing manager has to evaluate some lease agreements under the following conditions: • The company’s marginal federal-plus-state income tax rate is 30%. • The company has alternative investment options of similar risk that yield 5.50%. Assuming all other factors and values are constant among these leases, from the lessor’s perspective, which of the following is the best lease? A lease that generates an after-tax rate of return of 2.75%. A lease that has an NPV of –$120,000. A lease that has an IRR of 3.05%. A lease that has an MIRR of 4.45%.
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
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Pele Corp. is a professional leasing company. The leasing manager has to evaluate some lease agreements under the following conditions:
| • | The company’s marginal federal-plus-state income tax rate is 30%. |
| • | The company has alternative investment options of similar risk that yield 5.50%. |
Assuming all other factors and values are constant among these leases, from the lessor’s perspective, which of the following is the best lease?
A lease that generates an after-tax rate of return of 2.75%.
A lease that has an NPV of –$120,000.
A lease that has an IRR of 3.05%.
A lease that has an MIRR of 4.45%.
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