You work for a nuclear research laboratory that is contemplating leasing a diagnostic scanner (leasing is a common practice with expensive, high-tech equipment). The scanner costs $4,730,000, and it would be depreciated straight-line to zero over four years. Because of radiation contamination, it will actually be completely valueless in four years. You can lease it for $1,450,000 per year for four years. Assume that the tax rate is 35 percent. You can borrow at 10 percent before taxes. Assume that lease payments are made at the end of the year. a. Calculate the NPV. (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.) NPV $ b. Should you lease or buy? Buy • Lease
You work for a nuclear research laboratory that is contemplating leasing a diagnostic scanner (leasing is a common practice with expensive, high-tech equipment). The scanner costs $4,730,000, and it would be depreciated straight-line to zero over four years. Because of radiation contamination, it will actually be completely valueless in four years. You can lease it for $1,450,000 per year for four years. Assume that the tax rate is 35 percent. You can borrow at 10 percent before taxes. Assume that lease payments are made at the end of the year. a. Calculate the NPV. (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.) NPV $ b. Should you lease or buy? Buy • Lease
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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Please correct answer and don't use hend raiting
Transcribed Image Text:You work for a nuclear research laboratory that is contemplating leasing a diagnostic scanner (leasing is a common practice with
expensive, high-tech equipment). The scanner costs $4,730,000, and it would be depreciated straight-line to zero over four years.
Because of radiation contamination, it will actually be completely valueless in four years. You can lease it for $1,450,000 per year for
four years. Assume that the tax rate is 35 percent. You can borrow at 10 percent before taxes. Assume that lease payments are made
at the end of the year.
a. Calculate the NPV. (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your
response.)
NPV
$
b. Should you lease or buy?
Buy
• Lease
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