deposits in leasing The Wildcat Oil Company is trying to...
50.1K
Verified Solution
Link Copied!
Question
Accounting
deposits in leasing
The Wildcat Oil Company is trying to decide whether to lease or buy a new computerassisted drilling system for its oil exploration business. Management has decided that it must use the system to stay competitive, it will provide $4.4 million in annual pretax cost savings. The system costs $9.5 million and will be depreciated straight-line to zero over its five-year life, after which it will be worthless. Wildcat's tax rate is 24 percent and the firm can borrow at 8 percent. Lambert Leasing Company has offered to lease the drilling equipment to Wildcat for payments of $2,090,000 per year. Lambert's policy is to require its lessees to make payments at the start of the year. Suppose Lambert requires Wildcat to pay a $970,000 security deposit at the inception of the lease. Calculate the NAL with the security deposit. (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89.) The Wildcat Oil Company is trying to decide whether to lease or buy a new computerassisted drilling system for its oil exploration business. Management has decided that it must use the system to stay competitive, it will provide $4.4 million in annual pretax cost savings. The system costs $9.5 million and will be depreciated straight-line to zero over its five-year life, after which it will be worthless. Wildcat's tax rate is 24 percent and the firm can borrow at 8 percent. Lambert Leasing Company has offered to lease the drilling equipment to Wildcat for payments of $2,090,000 per year. Lambert's policy is to require its lessees to make payments at the start of the year. Suppose Lambert requires Wildcat to pay a $970,000 security deposit at the inception of the lease. Calculate the NAL with the security deposit. (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89.)
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Zin AI - Your personal assistant for all your inquiries!
