A firm is considering leasing.The firm can borrow at 9%,and the marginal corporate tax rate is 30%.What is the discount rate for valuing the lease?

Name: A firm is considering leasing.The firm can borrow at 9%,and the marginal corporate tax rate is 30%.What is the discount rate for valuing the lease?
Brand: Quizplus
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Question

Quizplus · Accepted Answer

The discount rate for valuing the lease is calculated as follows:
Discount Rate = After-tax cost of debt * (1 - Marginal tax rate)
= 0.09 * (1 - 0.3)
= 0.063 or 6.3%
Therefore, the correct choice is D.

A Firm Is Considering Leasing