Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

25 How to solve? Answer: $1,310.03 Similar to the example in class on How much should you charge for a lease?, assume that you have

25

image text in transcribed

How to solve? Answer: $1,310.03

Similar to the example in class on How much should you charge for a lease?, assume that you have computed Total Cash Flow associated with the costs of purchasing, maintaining, and the tax depreciation effects for an asset you plan to lease. The amounts for Total Cash Flow are presented in the seventh row in the table below. As shown, the present value of these costs using a 10% discount rate is -$6073.3708. What yearly before-tax" rent must you receive from the lessee so that the present value of the after-tax rent equals $6073.3708? (Assume the rents are the same each year, start at time 0 and end at time 7, so there are eight total payments. Use a 21% tax rate. Calculate the after-tax rent first using the 10% discount rate, then use this amount to calculate the before-tax rent.) 0 1 2 3 4 5 6 7 8 Asset cost Maintenance Tax Depreciation Taxable income Tax Benefit (at 21%) Total Cash Flow -5000.00 734.00 -316.00 -316.00 -316.00 -474.00 -474.00 -474.00 -474.00 PV at 10% -6073.3708 After-tax rent Calculate Calculate Calculate Calculate Calculate Calculate Calculate Calculate PV at 10% 6073.3708

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Oxford Handbook Of The Sociology Of Finance

Authors: Karin Knorr Cetina, Alex Preda

1st Edition

0198708777, 978-0198708773

More Books

Students also viewed these Finance questions

Question

3. Contrast relational contexts in organizations

Answered: 1 week ago

Question

2. Describe ways in which organizational culture is communicated

Answered: 1 week ago

Question

1. Describe and compare approaches to managing an organization

Answered: 1 week ago