Question
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 NPV of the lease (Net Advantage of Leasing)?
A. | $-305,388 | |
B. | $-223,636 | |
C. | $-290,072 | |
D. | $-156,128 | |
E. | $-391,699 |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started