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A firm has a lease that has rent payments for three years of $6,000 each year. The firms borrowing rate on secured debt is
A firm has a lease that has rent payments for three years of $6,000 each year. The firms borrowing rate on secured debt is 5%. The tax rate is 25% The lease is classified as an OPERATING LEASE. Note: GAAP stands for generally accepted accounting principles We can say that (show work) a) the initial operating liability will be approximately $16,339 and first year pre-tax GAAP expense due to the lease will be $6,000 in year one b) The first year operating liability will be approximately $16,730 and first year pre-tax GAAP expense due to the lease will be $6,000 in year one c) the initial operating liability will be approximately $16,339 and first year pre-tax GAAP expense due to the lease will be approximately $6.263 in year one. d) The first year operating liability will be approximately $16,730 and first year pre-tax GAAP expense due to the lease will be $6,413 in year one
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