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Scana Corporation is considering leasing a new equipment. The lease lasts for 5 years. The lease...

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Finance

Scana Corporation is considering leasing a new equipment. Thelease lasts for 5 years. The lease calls for 5 payments of $34,000per year with the first payment occurring immediately. Theequipment would cost $126,000 to buy and would be straight-linedepreciated to a zero salvage value over 5 years. The actualsalvage value is negligible because of technological obsolescence.The firm can borrow at a rate of 6.5%. The corporate tax rate is25%. What is the NPV of the lease relative to the purchase if theasset had a pretax salvage value of $4,600 (ignoring any possiblerisk differences)?

-$20,274.43

-$16,783.21

-$11,466.25

$13,427.88

$21,197.33

Answer & Explanation Solved by verified expert
3.8 Ratings (447 Votes)
Solution The NPV of the lease relative to the purchase if theasset had a pretax salvage value of    See Answer
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Transcribed Image Text

Scana Corporation is considering leasing a new equipment. Thelease lasts for 5 years. The lease calls for 5 payments of $34,000per year with the first payment occurring immediately. Theequipment would cost $126,000 to buy and would be straight-linedepreciated to a zero salvage value over 5 years. The actualsalvage value is negligible because of technological obsolescence.The firm can borrow at a rate of 6.5%. The corporate tax rate is25%. What is the NPV of the lease relative to the purchase if theasset had a pretax salvage value of $4,600 (ignoring any possiblerisk differences)?-$20,274.43-$16,783.21-$11,466.25$13,427.88$21,197.33

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