An asset costs $890,000 and will be depreciated in astraight-line manner over its four-year life. It will have nosalvage value. The corporate tax rate is 21 percent and theappropriate interest rate is 8 percent.
a. What would the lease payment have to be to make both thelessor and lessee indifferent about the lease?
b. Assume that the lessee pays no taxes and the lessor paystaxes. For what range of lease payments does the lease have apositive NPV for both parties? (
