In Section 26.5 we listed four circumstances in which there are potential gains from leasing. Check them
Question:
In Section 26.5 we listed four circumstances in which there are potential gains from leasing. Check them out by conducting a sensitivity analysis on the Greymare Bus Lines lease, assuming that Greymare does not pay tax. Try, in turn,
(a) A lessor tax rate of 50 percent (rather than 35 percent),
(b) Immediate 100 percent depreciation in year 0 (rather than five-year ACRS),
(c) A three-year lease with four annual rentals (rather than an eight-year lease), and
(d) An interest rate of 20 percent (rather than 10 percent). In each case, find the minimum rental that would satisfy the lessor and calculate the NPV to the lessee.
Step by Step Answer:
The original cash flows are as given in the text In general the net present value of the lessors cas...View the full answer
Principles of Corporate Finance
ISBN: 978-0072869460
7th edition
Authors: Richard A. Brealey, Stewart C. Myers
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