A firm is considering leasing a new machine.The firm can borrow at 12%,and the cost of capital is 14%.What is the approximate discount rate for valuing the lease if the corporate tax rate is 40%?
A) 12%
B) 14%
C) 2.7%
D) 7.2%

Name: A firm is considering leasing a new machine.The firm can borrow at 12%,and the cost of capital is 14%.What is the approximate discount rate for valuing the lease if the corporate tax rate is 40%? A) 12% B) 14% C) 2.7% D) 7.2%
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Question

Quizplus · Accepted Answer

Discount rate = 12(1 - 0.3%)= 7.2%

A Firm Is Considering Leasing a New Machine