If the lease payments of the $800,000 asset were $210,000, first payment occurring at the beginning of the first year when the lease is signed, how would the lessee treat these payments in his financial lease analysis? His tax rate is 40%.

Question

Quizplus · Accepted Answer

The lessee would treat the lease payments as a cash outflow but would also get a tax benefit from these payments. Since the tax rate is 40%, the net cash outflow would be $210,000 * (1 - 0.40) = $126,000 per year, reflecting the tax savings from the lease payments.

If the Lease Payments of the $800,000 Asset Were $210,000