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Nodhead College needs a new computer. It can either buy it for $285,000 or lease it from Compulease. The lease terms require Nodhead to make
Nodhead College needs a new computer. It can either buy it for $285,000 or lease it from Compulease. The lease terms require Nodhead to make six annual payments (prepaid) of $69,000. Nodhead pays no tax. Compulease pays tax at 30%. 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 10%. a. What is the NPV of the lease for Nodhead College? (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? (Do not round intermediate calculations. Round your answer to the nearest whole number.) c. What is the overall gain from leasing? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to the nearest whole number.)
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