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 $6,500,000 and it would be depreciated straight-line to zero over three years. Because of radiation contamination, it will actually be completely valueless in three years. You can lease it for $2,673,000 per year for three years. Assume a 36 percent tax bracket. You can borrow at 12 percent before taxes. What is the NAL of the lease from the lessor?s viewpoint? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) NAL $

Explanation / Answer

Particular/Year 0 1 2 3 Buy the scannet(A) 6500000 Depriciation=6500000/3 2166667 2166667 2166667 Tax Benefit @35%(B) 758333.3 758333.3 758333.3 Net Cash Flow=(B-A) -6500000 758333.3 758333.3 758333.3 Discounted@12% -6500000 677083.3 604538.7 539766.7 NPV(Buy) -4678611 Lease 2673000 2673000 2673000 Discounted@12% 2386607 2130899 1902589 NPV(Lease) 6420095 NAV=NPV(Lease)-NPV(Buy) 1741484

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