Answer Happy

NBT Itd is a sportswear manufacturer. The company recently plans to upgrade its production using automatic machines. Because of the high costs of the machines, the company is considering a lease opportunity offered by a finance company called JET Finance who charges $1.9 million lease payment per year for 20 years. NBT finds this offer acceptable but wishes to negotiate for a better offer. The following list shows the necessary information for conducting an analysis on this offer. cost of machine: $15,000,000 useful life of the machine: 20 years depreciation method: straight-line for 20 years with O residual value. lease term: 20 years cost of debt for NBT: 6% p.a. tax rate for NBT: 20% tax rate for JET Finance: 35% Requirement: determine the minimum lease payment that can be accepted by JE Finance.