Question
a. Boston Paper Inc. is considering leasing a printing press from Revere Corp. Boston's pretax cost of debt is 7%, its WACC is 14%, and
a. Boston Paper Inc. is considering leasing a printing press from Revere Corp. Boston's pretax cost of debt is 7%, its WACC is 14%, and it's tax rate is 40%. What rate would Boston use to discount its NAL CFs?
b. Amax Corp. is leasing a generator to Amat Corp. Find the NALof the lease for Amax. Assume the generator has no salvage value.
CF0=-19, CF1=7, CF2=5, CF3=6. Amax's required rate of return is 12%
c. We've found the lease payment in step two to be 1,518. This is the after-tax lease payment. What would the pretax lease payment have to be in order for us to make our required rate of return if our tax rate is 40%.
Hint: This is the answer from step 3.
d. We are the lessor and plan to sell the asset for $14,155 at the end of the lease. It currently has a BV of 5,455. What is the after-tax salvage value if our tax rate is 40%.
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