Question
7. Procter and Gamble (P&G) is considering leasing new manufacturing equipment to expand its current business. Suppose the purchase price is $5 million, and its
7.
Procter and Gamble (P&G) is considering leasing new manufacturing equipment to expand its current business. Suppose the purchase price is $5 million, and its residual value in five years is certain to be $200,000, and there is no risk that Procter and Gamble will default on the lease. Assume that capital markets are perfect and the risk-free interest rate is 4.8% APR with monthly compounding. Given that the lease payments are made at the beginning of each month, the monthly lease payments for a five-year fixed-price lease of the equipment with a $50,000 final price are closest to:
a.
$92,789.
b.
$90,943.
c.
$90,580.
d.
$93,525.
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