An asset costs $825,000 and will be depreciated in a straightline manner over its three-year life. It will have no salvage value. The corporate tax rate is 22 percent and the appropriate interest rate is 7 percent.

a. What set of lease payments will make the lessee and the lessor equally well off?

b. Show the general condition that will make the value of a lease to the lessor the negative of the value to the lessee.

c. Assume that the lessee pays no taxes and the lessor is in the 22 percent tax bracket.

For what range of lease payments does the lease have a positive NPV for both parties?