Your firm is considering leasing a new stamping press. The lease lasts for 5 years. The lease calls for 6 payments of $ 12,500 every year with the first payment occurring immediately. The press would cost $59,000 to buy and would be depreciated using the straight-line method to a $22, 125 salvage value over 5 years. The firm can borrow at a rate of 5.15%. The corporate tax rate is 31 %. What is the NPV of the lease?
Your firm is considering leasing a new stamping press. The lease lasts for 5 years. The lease calls for 6 payments of $ 12,500 every year with the first payment occurring immediately. The press would cost $59,000 to buy and would be depreciated using the straight-line method to a $22, 125 salvage value over 5 years. The firm can borrow at a rate of 5.15%. The corporate tax rate is 31 %. What is the NPV of the 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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Transcribed Image Text:Your firm is considering leasing a new stamping press. The lease lasts for 5 years. The lease calls for 6 payments of $
12,500 every year with the first payment occurring immediately. The press would cost $59,000 to buy and would be
depreciated using the straight-line method to a $22, 125 salvage value over 5 years. The firm can borrow at a rate of
5.15%. The corporate tax rate is 31 %. What is the NPV of the lease?
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