Problem 3. Please note this is from the point of view of the lessor, the owner, not the renter. What is the minimum leas
Posted: Sun May 29, 2022 4:58 pm
Problem 3.
Please note this is from the point of view of the
lessor, the owner, not the renter.
What is the minimum lease payment that would make purchasing a
precision manufacturing machine and writing a 4-year lease contract
on it? The price of the machine is $175,000, it is a
three-year asset for depreciation purposes, it has a residual value
of $7,000, it requires $500 maintenance per year, the cost of
capital is 10%, and the corporate tax rate is 40%.
Note: MACRS rates for Years 1 to 4 are 0.33, 0.45, 0.15,
and 0.07.
Please note this is from the point of view of the
lessor, the owner, not the renter.
What is the minimum lease payment that would make purchasing a
precision manufacturing machine and writing a 4-year lease contract
on it? The price of the machine is $175,000, it is a
three-year asset for depreciation purposes, it has a residual value
of $7,000, it requires $500 maintenance per year, the cost of
capital is 10%, and the corporate tax rate is 40%.
Note: MACRS rates for Years 1 to 4 are 0.33, 0.45, 0.15,
and 0.07.