8. Acme has branched out to rentals of office furniture to start-up companies. Consider a $3,000 desk.

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8. Acme has branched out to rentals of office furniture to start-up companies. Consider a

$3,000 desk. Desks last for six years and can be depreciated on a five-year MACRS schedule

(see Table 6.4). What is the break-even operating lease rate for a new desk? Assume that lease rates for old and new desks are the same and that Acme’s pretax administrative costs are $400 per desk per year. The cost of capital is 9% and the tax rate is 35%. Lease payments are made in advance, that is, at the start of each year. The inflation rate is zero.

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Principles Of Corporate Finance

ISBN: 9780071314176

10th Global Edition

Authors: Richard Brealey

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