Question
Aztec College needs a new computer. It can either buy it for $250,000 or lease it from Macrolease company. The lease terms require Aztec to
Aztec College needs a new computer. It can either buy it for $250,000 or lease it from Macrolease company. The lease terms require Aztec to make six annual payments (prepaid) of $62,000. Macrolease needs to pay six annual maintenance costs (prepaid) of $10,000. Macrolease pays tax at 40%. Macrolease can depreciate the computer for tax purposes over 5 years starting from year 1. The computer will have a residual value of $50,000 at the end year 5. Macroleases before tax cost of capital is 8%. For depreciation, Macrolease adopts MACRS method. Hint; please use after tax cost of capital.
*. Depreciation schedule for 5 years under MACRS (IRS required): 20%, 32%, 19.2%, 11.52%, 11.52%, 5.76% .
What is the NPV of lease for Macrolease ?
| A. | $96,540 | |
| B. | $83,467 | |
| C. | -$108,321 | |
| D. | $28,880 | |
| E. | $52,346 | |
| F. | $-$36,408 | |
| G. | $120,430 | |
| H. | $273,521 |
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