I need help answering this question, I cant figure out the percentage of the IRR...
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I need help answering this question, I cant figure out the percentage of the IRR lease.
Big Sky Hospital plans to obtain a new MRI that costs $1.5 million and has an estimated four-year useful life. It can obtain a bank loan for the entire amount and buy the MRI or it can lease the equipment. Assume that the following facts apply to the decision: - The MRI falls into the three-year class for tax depreciation, so the MACRS allowances are 0.33 , 0.45,0.15, and 0.07 in Years 1 through 4, respectively. - Estimated maintenance expenses are $75,000 payable at the beginning of each year whether the MRI is leased or purchased. - Big Sky's marginal tax rate is 40 percent. - Big Sky's cost of debt is 15 percent. - If leased, the lease (rental) payments would be $400,000 payable at the end of each of the next four years. - The estimated residual (and salvage) value is $250,000. What is the NAL of the lease? Note: Format is $xxx,xxx if positive; ($xxx,xox) if negative What is the IRR of the lease? Note: Format is x,x% if positive; x.x% if negative
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