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Marshall Corporation is considering leasing a new equipment. The lease lasts for 8 years. The lease...

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Finance

Marshall Corporation is considering leasing a new equipment. Thelease lasts for 8 years. The lease calls for 8 payments of $102,000per year with the first payment occurring immediately. Theequipment would cost $680,000 to buy and would be straight-linedepreciated to a zero salvage value over 8 years. The actualsalvage value is negligible because of technological obsolescence.The firm can borrow at a rate of 7.2%. The corporate tax rate is25%. What is the NPV of the lease relative to the purchase?

$30,586.27

$32,038.82

$34,410.65

-$35,216.18

-$28,297.36

Answer & Explanation Solved by verified expert
3.7 Ratings (500 Votes)
Solution The NPV of the lease relative to the purchase is 3203882Thus the solution is    See Answer
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Transcribed Image Text

Marshall Corporation is considering leasing a new equipment. Thelease lasts for 8 years. The lease calls for 8 payments of $102,000per year with the first payment occurring immediately. Theequipment would cost $680,000 to buy and would be straight-linedepreciated to a zero salvage value over 8 years. The actualsalvage value is negligible because of technological obsolescence.The firm can borrow at a rate of 7.2%. The corporate tax rate is25%. What is the NPV of the lease relative to the purchase?$30,586.27$32,038.82$34,410.65-$35,216.18-$28,297.36

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