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 maximum lease payment that the firm would be willing to make?
A. | $232,132 | |
B. | $212,633 | |
C. | $42,284 | |
D. | $194,333 | |
E. | $140,338 |
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