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Uminum, the world's largest producer of feldspar, is considering leasing a sifter that costs $450,0000. The 5 year lease requires 5 beginning of the year
Uminum, the world's largest producer of feldspar, is considering leasing a sifter that costs $450,0000. The 5 year lease requires 5 beginning of the year payments. The leasing company is depreciating the sifter on a straight-line basis of $90,000 per year to a salvage value of zero, but assumes the actual salvage value at the end of 5 years is expected to be $25,000. If the leasing company desires to earn an 11% after-tax rate of return of the lease, what annual lease payments will they require? Assume a marginal tax rate of 40%.
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