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Acme has branched out to rentals of office furniture to start - up companies. Consider a $ 3 , 0 0 0 desk. Desks last
Acme has branched out to rentals of office furniture to startup companies. Consider a $ desk. Desks last for six years and can be depreciated immediately. Assume that lease rates for old and new desks are the same and that Acmes pretax administrative costs are $ per desk in each of years to The cost of capital is and the tax rate is Lease payments are made in advance, that is at the start of each year. The inflation rate is zero.
What is the breakeven operating lease rate for a new desk? Hint: Since lease payments are made at the beginning of the year, use annuity due.
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