Question
Round your final answer to 4 decimal places. Only accept hand-written assignment.NO USE OF EXCEL PREMITTED Question 3 Doggle Inc. is considering a 12-year project
Round your final answer to 4 decimal places.
Only accept hand-written assignment.NO USE OF EXCEL PREMITTED
Question 3
Doggle Inc. is considering a 12-year project that generates $6,000 per year. It can either purchase the equipment for $28,500 or lease it from Loggle for $3,250 per year (paid at the beginning of each year). The equipment, which has a CCA rate of 25%, will have a salvage value of $1,500 at the end of year 12. Doggle does not have any other asset in the asset class. Its cost of debt is 7.5% and tax rate is 20%.
Loggle is a large leasing company that always has positive UCC for all its asset classes. Its cost of debt is 6% and tax rate is 30%.
- What is Doggles NPV of leasing the equipment?
- What is the minimum lease payment required by Loggle.
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