Al-Tek is considering leasing some new equipment for 5 years with annual payments. The equipment would cost $115,000 to buy and would be depreciated straight-line to a zero salvage value. The actual salvage value is zero. The applicable pretax borrowing rate is 8 percent. The lessee does not expect to owe taxes for several years. The lessor’s tax rate is 35 percent. What is the minimum lease payment that will be acceptable to both parties?
Al-Tek is considering leasing some new equipment for 5 years with annual payments. The equipment would cost $115,000 to buy and would be depreciated straight-line to a zero salvage value. The actual salvage value is zero. The applicable pretax borrowing rate is 8 percent. The lessee does not expect to owe taxes for several years. The lessor’s tax rate is 35 percent. What is the minimum lease payment that will be acceptable to both parties?
Chapter19: Lease And Intermediate-term Financing
Section: Chapter Questions
Problem 2P
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Al-Tek is considering leasing some new equipment for 5 years with annual payments. The equipment would cost $115,000 to buy and would be
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