Sadiki Industries must install $1,000,000 of new environmentally friendly machinery in its Massachusetts plant. It can obtain a 6-year bank loan for 100% of the cost at a 14% interest rate with equal payments at the end of each year. Sadikis tax rate is 25%. The equipment falls in the MACRS 3-year class of 0.3333, 0.4445, 0.1481 and 0.0741.

Alternatively, an investment bank can arrange a guideline lease calling for payments of $320,000 at the end of each year for 3 years. Under the proposed lease terms, Sadiki must pay for insurance, property taxes and maintenance.

Sadiki must use the equipment to continue in business, so it will certainly want to acquire the property at the end of the lease. If it does, then under the lease term it can purchase the machinery at its fair market value at year 3. The best estimate of this market value is $200,000 but it could be higher or lower under certain circumstances. If purchased at year 3, the used equipment would fall into the MACRS 3-year class. Sadiki would actually be able to purchase on the last day of the year (i.e., slightly before year 3), so Sadiki would get to take the first depreciation expense at year3. (the remaining depreciation expenses would be from year 4 through year 6). To assist management in making the proper lease-versus-buy decision, please analyze the following:

Consider the $200,000 estimated residual value. How high could the residual value get before the net advantage to leasing falls to zero?

Please explain in excel using how to use goal seek.