Daily Enterprises is contemplating the acquisition of some new equipment. The purchase

price is $46,000 and will require a maintenance contract of $2,000 at the beginning of each year. The company expects to sell the equipment at the end of year 4 for $5,000. The firm will use MACRS depreciation with a 3-year life. The equipment can be leased for $12,300 a year for 4 years. The firm can borrow money at 7.5 percent and has a 35 percent tax rate.

7. (EXCELTEMPLATE) What would the lease payment have to be for both lessor and lessee to be indifferent about the lease? Tax rates and borrowing costs are the same for both parties.

7. What would the lease payment have to be for both lessor and lessee to be indifferent about the lease? Tax rates and borrowing costs are the same for both parties.
Hint: After tax cash flows of leasing need to have the same NPV as owning.
Use the NPV of owning as the PV in a payment calculation.
Solve for Payment (PMT)
The payment amount that you just calculated is on an AFTER TAX basis, so find the BEFORE
TAX amount and place it in the Lease Pmt box below.
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Lease Pmt
Tax Savings
Total Cash Flow
NPV - Leasing