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Your firm is considering leasing a new robotic milling control system. The lease lasts for 5 years. The lease calls for 6 payments of $300,000
Your firm is considering leasing a new robotic milling control system. The lease lasts for 5 years. The lease calls for 6 payments of $300,000 per year with the first payment occurring at lease inception. The equipment would cost $1,050,000 to buy and would be straight-line depreciated to a zero book value over its 5-year life. The salvage value will be zero as well. The firm can borrow at 8%, its WACC is 12%, and the corporate tax rate is 34%.
What is the appropriate discount rate for valuing the lease?
A.12.00%
B.7.92%
C.5.28%
D.2.72%
E.8.00%
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