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Nodhead College needs a new computer. It can either buy it for $295,000 or lease it from Compulease. The lease terms require Nodhead to
Nodhead College needs a new computer. It can either buy it for $295,000 or lease it from Compulease. The lease terms require Nodhead to make six annual payments (prepaid) of $71,000. Nodhead pays no tax. Compulease pays tax at 35%. Compulease can depreciate the computer for tax purposes straight-line over five years. The computer will have no residual value at the end of year 5. The interest rate is 6%. a. What is the NPV of the lease for Nodhead College? Note: A negative answer should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to the nearest whole number. b. What is the NPV for Compulease? Note: Do not round intermediate calculations. Round your answer to the nearest whole number. c. What is the overall gain from leasing? Note: A negative answer should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to the nearest whole number. a. Net present value b. Net present value c. Overall gain
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