Purchase Solution

Net present value (NPV) of the lease

Not what you're looking for?

Ask Custom Question

A firm is considering leasing a new system. The lease lasts for 5 years. The lease calls for 6 payments of $300,000 per year with the first payment occurring at lease inception. The system would cost $1,050,000 to buy and would be straight-line depreciated to a zero salvage value. The actual salvage value is zero. The firm can borrow at 8%, and the corporate tax rate is 34%.

Purchase this Solution
Purchase this Solution
Free BrainMass Quizzes
Organizational Leadership Quiz

This quiz prepares a person to do well when it comes to studying organizational leadership in their studies.

Lean your Process

This quiz will help you understand the basic concepts of Lean.

Change and Resistance within Organizations

This quiz intended to help students understand change and resistance in organizations

SWOT

This quiz will test your understanding of the SWOT analysis, including terms, concepts, uses, advantages, and process.

Basics of corporate finance

These questions will test you on your knowledge of finance.

View More Free Quizzes
Related BrainMass Solutions

  • Your Firm is Considering Leasing a New Computer

    This solution contains step-by-step calculations to determine the net present value of the leasing situation and the net present value of the robotic mailing system.

  • Finance involving depreciation and maximum before tax payment

    The maximum lease payment would be such that the present value of lease is the same as the present value of buy.

  • Lease vs purchase

    Thus we should consider NPV and IRR. Here NPV is negative, which means that its outflows are more than the present value of inflows. Hence we should reject it. Moreover IRR is also less than the required rate of return of 14%.

  • Definition of Factors and Cost Measurement

    The NPV or net present value calculates the present value of an investment's cash inflows minus the present value of its costs using a discount rate. The discount rate is usually the cost of obtaining the capital to finance the investment.

  • some differences between IRR and PI and NPV

    IRR Often used in capital budgeting, it's the interest rate that makes net present value of all cash flow equal zero.

  • Regression analysis - mean

    What is the net present value of a lease that requires you to pay $10,000 at the beginning of each year for the next five years and includes a provision for a rebate of $5,000 at eh end of Year 5?

  • Capital Budgeting, Leasing

    NPV (Net Present Value) method is the best to use for capital budgeting decisions.

  • Interest Rates, Time Value, Investments, IRR, NPV and Leases

    #2: Applying the Time Value a. If the interest rate is 8%, what is the present value of the sales price? The present value of the sales price is given as 4,000,000/(1.08)^5 = 2,722,333 b.

  • Anticipated revenue and estimated rate of return

    The anticipated revenue in either location is 1500 per month. the estimated rate of return is 10%. using net present value determine which location would be better A: 12 x (1500 - 1000) = 12 x 500 = 6000 NPV of 6000 = 6000 + ($6000/1.1) +

View More Related Solutions