If your firm purchases a machine costing $2 million, it would depreciate that machine straight-line to zero over four years, after which time the machine would be worthless. Your firm has a tax rate of 23 percent and borrows funds at 6 percent before taxes. Your firm is also considering leasing this machine. How much would the lease payment have to be in order for both the lessor and your firm to be indifferent about leasing?
A) $601,316
B) $521,909
C) $552,200
D) $563,333
E) $576,693

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The Answer of If your firm purchases a machine costing $2 million, it would depreciate that machine straight-line to zero over four years, after which time the machine would be worthless. Your firm has a tax rate of 23 percent and borrows funds at 6 percent before taxes. Your firm is also considering leasing this machine. How much would the lease payment have to be in order for both the lessor and your firm to be indifferent about leasing?
A) $601,316
B) $521,909
C) $552,200
D) $563,333
E) $576,693

If Your Firm Purchases a Machine Costing $2 Million, It