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    Annual after-tax required lease income

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    Leases R Us, Inc. (LRU) has been contracted by Robotics of Beverly Hills (RBH) to provide lease financing for a machine that would assist in automating a large part of their current assembly line. Annual lease payments will start at the beginning of each year. The purchase price of this machine is $250,000, and it will be leased by RBH for a period of 5 years. LRU will utilize straight line depreciation of $50,000 per year with a zero book salvage value. However, salvage value is estimated to actually be $50,000 at the end of 5 years. LRU is required to earn a 12%, after-tax rate of return on the lease. LRU uses a marginal tax rate of 35%.

    a.) Calculate the amount to be amortized?
    b.) Calculate the annual after-tax required lease income?
    c.) Calculate the lease payment

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    Solution Preview

    Leases R Us, Inc. (LRU) has been contracted by Robotics of Beverly Hills (RBH) to provide lease financing for a machine that would assist in automating a large part of their current assembly line. Annual ...

    Solution Summary

    This provides the steps to calculate the annual after-tax required lease income

    $2.19

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