You work for a nuclear research laboratory that is contemplating leasing a diagn

Question

You work for a nuclear research laboratory that is contemplating leasing a diagnostic scanner (leasing is a very common practice with expensive, high-tech equipment). The scanner costs $8,010,000, and it would be depreciated straight-line to zero over five years. Because of radiation contamination, it will actually be completely valueless in four years. You can lease it for $2,320,000 per year for five years.

Assume that your company does not anticipate paying taxes for the next several years. You can borrow at 14 percent before taxes. What is the NAL of the lease? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

NAL- ? $

You work for a nuclear research laboratory that is contemplating leasing a diagnostic scanner (leasing is a very common practice with expensive, high-tech equipment). The scanner costs $8,010,000, and it would be depreciated straight-line to zero over five years. Because of radiation contamination, it will actually be completely valueless in four years. You can lease it for $2,320,000 per year for five years.

Explanation / Answer

Cost of scanner    8,010,000 Depreciation    1,602,000 Lease amount 2,320,000 No. of years                    5 Annuity factor 5 yrs 14% 3.4331 PV of lease option    7,964,748 If loan is taken PA interest on loan 14%    1,121,400 Annuity factor 5 yrs 14% 3.4331    3,849,857 PV interest factor 5 yrs 14% 0.5194 principal repaid 4,160,143 PV of loan option 8,010,000 NAV of lease    45,252.15 8010000-7964747.85

Related Questions

Navigate

• Browse (All)
• Browse Y
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.