An asset costs $$640,000$ and will be depreciated in a straight$-$line manner over its $3-$year life. It will have no salvage value.

The lessor can borrow at $7$ percent and the lessee can borrow at $9$ percent. The corporate tax rate is $21$ percent for both companies.

a$.$ How does the fact that the lessor and lessee have different borrowing rates affect the calculation of the NAL?

b$.$ What set of lease payments will make the lessee and the lessor equally well off?

c$.$ Assume that the lessee pays no taxes and the lessor is in the $21$ percent tax bracket. For what range of lease payments does the lease have a positive NPV for both parties?