You are the CFO of a company.You are considering leasing photocopiers from the manufacturer instead of purchasing them for $200,000.You can borrow at 9% and the corporate tax rate is 35%.The lease payment will be $50,000 for five years.At the end of the five years, the photocopiers will be worthless.Photocopiers are depreciated at 20% CCA rate.What is the NPV of the lease?

Question

Quizplus · Accepted Answer

The NPV of the lease is calculated by comparing the cost of leasing to the cost of buying, taking into account tax savings from depreciation and interest. The NPV of leasing is $27,304.

You Are the CFO of a Company