The Wyoming Wind Power Co. has decided to acquire a new piece of capital equipment. These units cost $73,000,000 and they are depreciated by the five-year MACRS Schedule. You feel that the machines have an operating life of six years. You have discussed this matter with a Leasing Company, and they have offered you a lease with annual payments of $14,000,000 for six years. Wyoming Wind Power's before tax cost of borrowing is 5.70%, and the firm faces a 21% marginal tax rate. What is the Net Advantage of Leasing (NAL) of this lease contract? O +$5,634,825 O -$4,141,756 O +$4,006,893 -$2,513,825 O +$2,378,962
The Wyoming Wind Power Co. has decided to acquire a new piece of capital equipment. These units cost $73,000,000 and they are depreciated by the five-year MACRS Schedule. You feel that the machines have an operating life of six years. You have discussed this matter with a Leasing Company, and they have offered you a lease with annual payments of $14,000,000 for six years. Wyoming Wind Power's before tax cost of borrowing is 5.70%, and the firm faces a 21% marginal tax rate. What is the Net Advantage of Leasing (NAL) of this lease contract? O +$5,634,825 O -$4,141,756 O +$4,006,893 -$2,513,825 O +$2,378,962
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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Transcribed Image Text:The Wyoming Wind Power Co. has decided to acquire a
new piece of capital equipment. These units cost
$73,000,000 and they are depreciated by the five-year
MACRS Schedule. You feel that the machines have an
operating life of six years. You have discussed this matter
with a Leasing Company, and they have offered you a lease
with annual payments of $14,000,000 for six years.
Wyoming Wind Power's before tax cost of borrowing is
5.70%, and the firm faces a 21% marginal tax rate. What is
the Net Advantage of Leasing (NAL) of this lease contract?
O + $5,634,825
O -$4,141,756
+$4,006,893
-$2,513,825
+$2,378,962
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