A firm is considering leasing a printing machine.The lease lasts for 3 years.The lease calls for 3 payments of $4,000 per year with the first payment occurring immediately.The machine would cost $7,500 to buy and would be straight-line depreciated (tax purpose)to zero salvage value over 3 years.The firm can borrow at 5%,and the corporate tax rate is 30%.What is the NPV of the lease?

Question

Quizplus · Accepted Answer

NPV = 7,500 -4,000(1-0.3)-4,000 (1-0.3)(1/0.035 - 1/0.035(1+0.035)²) -2,500x0.3 (1/0.035 - 1/.035(1+0.035)³)=-$2,720.37

A Firm Is Considering Leasing a Printing Machine