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The Wildcat Oil Company is trying to decide whether to lease or buy a new computer-assisted drilling system for its oil exploration business. Management has

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The Wildcat Oil Company is trying to decide whether to lease or buy a new computer-assisted drilling system for its oil exploration business. Management has already determined that acquisition of the system has a positive NPV. The system costs $9.4 million and qualifies for a 25% CCA rate. The equipment will have a $975,000 salvage value in five years. Wildcat's tax rate is 36%, and the firm can borrow at 9%. Southtown Leasing Company has offered to lease the drilling equipment to Wildcat for payments of $2.15 million per year. Southtown's policy is to require its lessees to make payments at the start of the year. Many lessors require a security deposit in the form of a cash payment or other pledged collateral. Suppose Southtown requires Wildcat to pay a $800,000 security deposit at the inception of the lease. If the lease payment is still $2,150,000 a year, what is the NAL for Wildcat? (Enter the answer in dollars and not in millions of dollars. Negative answer should be indicated by a minus sign. Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.) NAL Is it advantageous for Wildcat to lease the equipment now? O Yes O No Suppose it is estimated that the equipment will have no salvage value at the end of the lease. What is the maximum lease payment acceptable to Wildcat now? (Enter the answer in dollars and not in millions of dollars. Do not round your intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.) Maximum pre-tax lease payment

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