Leidos Company has decided to acquire a new equipment at a cost of $740,000. The equipment has an expected life of 6 years and will be depreciated using 5-year MACRS with rates of .20, .32, .192, .1152, .1152, and .0576 (note that 5-year MACRS depreciation actually takes place over 6 years). There is no actual salvage value. Lincoln Financial Services has offered to lease the equipment to Leidos for $148,000 a year for 6 years, with lease payment at the end of each year. Leidos has a cost of equity of 9.6 percent, a pre-tax cost of debt of 6 percent, and a marginal tax rate of 36 percent. What would the NPV of the lease relative to the purchase be?

Answer rating: 100% (QA)

To calculate the net present value NPV of the lease relative to the purchase we need to compare the ... View the full answer