The Wildcat Oil Company is trying to decide whether to lease or buy a new computer- assisted drilling system for its oil exploration business. Management has decided that it must use the system to stay competitive; it will provide $1.7 million in annual pretax cost savings. The system costs $7.3 million and will be depreciated straight-line to zero over five years. Wildcat's tax rate is 36 percent, and the firm can borrow at 6 percent. Lambert Leasing Company has offered to lease the drilling equipment to Wildcat for payments of $1,680,000 million per year. Lambert's policy is to require its lessees to make payments at the start of the year. Many lessors require a security deposit in the form of a cash payment or other pledged collateral. Suppose Lambert requires Wildcat to pay a $200,000 security deposit at the inception of the lease. What is the NAL with the security deposit?
The Wildcat Oil Company is trying to decide whether to lease or buy a new computer- assisted drilling system for its oil exploration business. Management has decided that it must use the system to stay competitive; it will provide $1.7 million in annual pretax cost savings. The system costs $7.3 million and will be depreciated straight-line to zero over five years. Wildcat's tax rate is 36 percent, and the firm can borrow at 6 percent. Lambert Leasing Company has offered to lease the drilling equipment to Wildcat for payments of $1,680,000 million per year. Lambert's policy is to require its lessees to make payments at the start of the year. Many lessors require a security deposit in the form of a cash payment or other pledged collateral. Suppose Lambert requires Wildcat to pay a $200,000 security deposit at the inception of the lease. What is the NAL with the security deposit?
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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Question
![P27-9 Deposits in Leasing [LO3]
The Wildcat Oil Company is trying to decide whether to lease or buy a new computer-
assisted drilling system for its oil exploration business. Management has decided that it
must use the system to stay competitive; it will provide $1.7 million in annual pretax cost
savings. The system costs $7.3 million and will be depreciated straight-line to zero over
five years. Wildcat's tax rate is 36 percent, and the firm can borrow at 6 percent. Lambert
Leasing Company has offered to lease the drilling equipment to Wildcat for payments of
$1,680,000 million per year. Lambert's policy is to require its lessees to make payments
at the start of the year.
Many lessors require a security deposit in the form of a cash payment or other pledged
collateral. Suppose Lambert requires Wildcat to pay a $200,000 security deposit at the
inception of the lease. What is the NAL with the security deposit?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F08acdb31-1f54-417d-ac9a-5cbbe6d628cd%2F4f8d0644-bad3-463d-a1ad-82fb21ac77dd%2Fk1cbxzq_processed.jpeg&w=3840&q=75)
Transcribed Image Text:P27-9 Deposits in Leasing [LO3]
The Wildcat Oil Company is trying to decide whether to lease or buy a new computer-
assisted drilling system for its oil exploration business. Management has decided that it
must use the system to stay competitive; it will provide $1.7 million in annual pretax cost
savings. The system costs $7.3 million and will be depreciated straight-line to zero over
five years. Wildcat's tax rate is 36 percent, and the firm can borrow at 6 percent. Lambert
Leasing Company has offered to lease the drilling equipment to Wildcat for payments of
$1,680,000 million per year. Lambert's policy is to require its lessees to make payments
at the start of the year.
Many lessors require a security deposit in the form of a cash payment or other pledged
collateral. Suppose Lambert requires Wildcat to pay a $200,000 security deposit at the
inception of the lease. What is the NAL with the security deposit?
Transcribed Image Text:mun UnVILL
O
O
O
O
O
$-77,601.72
$107,032.80
$-243,257.50
$-73,721.64
$-81,481.81
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