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Ms. Williams is the owner-manager of Northern Lights Leasing Company. The company specializes in leasing out equipment to the manufacturing industry. The equipment most in
Ms. Williams is the owner-manager of Northern Lights Leasing Company. The company specializes in leasing out equipment to the manufacturing industry. The equipment most in demand is Northern Lights new CAD computer system, which costs $9,500,000. This equipment qualifies for a 32% CCA rate, well last for 9 years, and will have a salvage value of $550,000 at the end of the 9 years. Northern Lights bank, the Canadian New Bank, charged the company a borrowing rate of 11%. Northern Light's marginal corporate tax rate is 42%. You are the financial manager for Northern Lights Company. The Prince Company has approached you to lease them the CAD computer system. You provide them with the following lease terms: Term of lease: 9 years Lease payments: $1,950,000 Payment due: beginning of each year Northern Lights will be responsible for maintenance and upkeep of the system, costing $10,250 per year. Assume that maintenance costs are paid at the end of each year. D. what is the present value of Northern Lights after tax lease revenues? (Remember that the lease revenues will arrive at the beginning of each year
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