(Negotiating a lease rate) Amalgamated Leasing Corp. would like to submit a leasing proposal to the Sandoval Hardware Manufacturing Company. Sandoval has asked to lease 5 million worth of equipment under a 6 year lease. Amalgamated can depreciate the equipment for tax purposes on a straight line basis over the 6 year term to an estimated residual value of 250,000. The leasing firms income tax rate is 40%. Amalgamated has estimated sandovals 6 year cost of funds to be 10% for secured debt (83.33% financing) and 12% for unsecured debt. It has also estimated the required after-tax return for an investment in the assets to be 15%.

At what lease rate would Amalgamated be indifferent to making the lease?

Multiple choices are:

$1,002,483.22

$1,043,821.56

$1,097,836.17

$1,121,952.31

$1,135,281.88

$1,140,710.95

$1,151,458.73

$1,155,639.53