Use the information below for the next five questions: Ginger Company is negotiating a lease for five new tractor/trailer rigs with Beta Leasing Inc. Ginger has received its best offer from Bestbilt Trucks for a total price of $1.5 million. The terms of the lease offered by Beta International Inc call for a payment of $250,000 at the beginning of each year of the 5-year lease. As an alternative to leasing, the firm can borrow from a large insurance company and buy the trucks. The $1 million would be borrowed on a simple interest term loan at a 8 percent interest rate for 5 years. The trucks fall into the MACRS 5-year class and have an expected residual value of $100,000. The depreciation rates are 20.00%, 32.00%, 19.20%, 11.52%, 11.52% and 5.76%. Maintenance costs would be included in the lease. If the trucks were owned, a maintenance contract would be purchased at the beginning of each year for $10,000 per year. Ginger plans to buy a new fleet of trucks at the end of the fifth year. Beta Leasing Inc has a 30 percent federal-plus-state marginal tax rate, while Singer has a total tax rate of 40 percent. What is Ginger's present value of leasing? -$587,378 -$684,373 $684,373 -$732,681 $732,681 $587,378 What is the residual value of the truck if Ginger Company owns the asset? $57,789 $94,560 $8,160 $95,920 What is Ginger's after-tax maintenance cash flow at year 0? 0-$10,000 0-$4,000 0-$7,000 0-$6,000 0-$3,000 What is the Net Advantage to Leasing? O-$253,921 -$266,822 $266,822 0-$951,195 $951,195 Assume that the lessor's alternative to leasing is to invest in a 5-year certificate of deposit that pays 5 percent before taxes. What is the lessor's NPV of the lease investment? -$246,027 $326,872 -$326,872 0-$165,267 $165,267 Expert Answer

What is the residual value of the truck if Ginger Company owns the asset? $57,789 $94,560 $8,160 $95,920