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Brock Construction is contemplating purchasing/leasing a package of Asphalt Milling Equipment which will cost $4 million. Assets will qualify for a 30% CCA rate. The
Brock Construction is contemplating purchasing/leasing a package of Asphalt Milling Equipment which will cost $4 million. Assets will qualify for a 30% CCA rate. The salvage value is expected to be zero in 8 years. Same package can be leased for $700,000 per year for 8 years. Assume that the assets pool remains open, and the tax rate is 40%. Company's cost of borrowing is 10% pre-tax. What would the lease payment have to be for both lessor and lessee to be indifferent to the lease agreement?
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