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Yummy Food is expanding its business and wants to open a new facility to make frozen lasagna, which requires a new automated lasagna maker. A

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Yummy Food is expanding its business and wants to open a new facility to make frozen lasagna, which requires a new automated lasagna maker. A lasagna maker can be purchased for $420,000 or leased under a finance lease over 7 years, with lease payments to be made at the beginning of each year. If the company purchases the lasagna maker, it can be fully depreciated to zero using the straight-line method over seven years. The management expects the scrap/residual value of the lasagna maker to be $20,000 at the end of the lease. After a detailed analysis of the project, Yummy Food determines the appropriate after-tax cost of capital of the project to be 15% per annum. Yummy Food pays a corporate tax rate of 30% and it can borrow funds at a before-tax interest rate of 6% per annum. All cash-flows have been quoted on a before-tax basis. Given this information, what is the lease payment (per annum) that would make Yummy Food indifferent between leasing and borrow-to-buy the machine? (Using the approach discussed in the lecture) O $51,413.42 O None of the other answers is correct. O $37,017.66 O $69,553.50 O $55,251.61

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