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 decided that it

must use the system to stay competitive; it will provide $$1\mathrm{.}9$ million in annual pretax cost

eBook

Hint

Print

References

savings. The system costs $$9\mathrm{.}3$ million and will be depreciated straight$-$line to zero over

its five$-$year life, after which it will be worthless. Wildcat's tax rate is $21$ percent and the

firm can borrow at $7$ percent. Lambert Leasing Company has offered to lease the drilling

equipment to Wildcat for payments of $$2,120,000$ per year. Lambert's policy is to require

its lessees to make payments at the start of the year.

a$.$ What is the NAL for Wildcat? $($Do not round intermediate calculations and enter your

answer in dollars, not millions of dollars, rounded to $2$ decimal places, e$.$g$.,$

$1,234,567\mathrm{.}89.)$

b$.$ What is the maximum lease payment that would be acceptable to Wildcat? $($Do not

round intermediate calculations and enter your answer in dollars, not millions of

dollars, rounded to $2$ decimal places, e$.$g$.,1,234,567\mathrm{.}89.)$

a$.$ NAL

b$.$ Lease payment

please do not copy from chegg all previous answers are wrong