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Problem 21-13 Setting the Lease Price An asset costs $850,000 and will be depreciated in a straight-line manner over its three-year life. It will have
Problem 21-13 Setting the Lease Price
| An asset costs $850,000 and will be depreciated in a straight-line manner over its three-year life. It will have no salvage value. The corporate tax rate is 22 percent and the appropriate interest rate is 8 percent. |
| a. | What would the lease payment have to be to make both the lessor and lessee indifferent about the lease? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
| b. | Assume that the lessee pays no taxes and the lessor pays taxes. For what range of lease payments does the lease have a positive NPV for both parties? (Enter your answers from lowest to highest. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) |
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