XYZ Ltd intends to lease to another company for a duration of five years equipment which costs $500 000 and can be depreciated straight-line over three years for tax purposes.Assume the cost of capital is 10% p.a. ,the residual value is 20 per cent of cost,the tax rate is 30 per cent and that annual lease payments are payable in advance.Calculate the minimum before-tax lease payments that XYZ Ltd should quote if it desires a rate of return of 10 per cent after tax.

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The Answer of XYZ Ltd intends to lease to another company for a duration of five years equipment which costs $500 000 and can be depreciated straight-line over three years for tax purposes.Assume the cost of capital is 10% p.a. ,the residual value is 20 per cent of cost,the tax rate is 30 per cent and that annual lease payments are payable in advance.Calculate the minimum before-tax lease payments that XYZ Ltd should quote if it desires a rate of return of 10 per cent after tax.

XYZ Ltd Intends to Lease to Another Company for a Duration