Erbil Inc. has to decide whether they should purchase or lease an expensive equipment that...
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Erbil Inc. has to decide whether they should purchase or lease an expensive equipment that would increase their productivity. The asset has a purchase price of $800,000, CCA rate of 30%, and expected salvage value of $100,000 at the end of its useful life in 5 years.
The lessee (Erbil) can borrow at 10%, pays no taxes, and has a WACC of 12%. What is the maximum lease payment lessee would be willing to pay?
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