21. The Lollar Corporation plans to lease an $800,000 asset to the Pierce Corporation.

The lease will be for 12 years.

a. If the Lollar Corporation desires a 10 percent return on its investment, how much should the lease payments be?

b. If the Lollar Corporation is able to generate $120,000 in immediate tax shield benefits from the asset to be purchased for the lease arrangement and will pass the benefits along to the Pierce Corporation in the form of lower lease payments, how much should the revised lease payments be? Continue to assume the Lollar Corporation desires a 10 percent return on the 12-year lease.