Sunbelt Rentals is in the business of leasing a variety of heavy equipment to construction companies. The firm wants to develop a daily rental rate for a manlift that is expected to be operated for three years. The piece of equipment costs $41,000 and will require $1,750 in maintenance every year. The lessee will be responsible for all other operating expenses. The asset is classified as a five-year MACRS property and the expected salvage value at the end of the 3 years is $11,000. Sunbelts marginal tax rate is 35% and requires an after-tax return of 10%. History has shown that equipment such as this has a 60% daily utilization (under lease) rate.

A-What should the daily rental rate be set at?

B-Does it make sense to give discounted rates for weekly and monthly rentals? And if so, how much of a discount should be allowed?