PRINCIPLES OF CORPORATE FINANCE
PRINCIPLES OF CORPORATE FINANCE
13th Edition
ISBN: 9781264052059
Author: BREALEY
Publisher: MCG
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Chapter 19.A, Problem 2Q

You are considering a five-year lease of office space for R&D personnel. Once signed, the lease cannot be canceled. It would commit your firm to six annual $100,000 payments, with the first payment due immediately. What is the present value of the lease if your company’s borrowing rate is 9% and its tax rate is 21%? The lease payments would be tax-deductible.

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