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Nantec Company Is Considering a Three Year Financial Lease What Is the Value of the Lease

Question 58

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Nantec Company is considering a three year financial lease.A cash flow schedule was developed that reflects the cost of the machine, CCA tax shields and after tax lease payments.The company has a 12% return requirement and a 40% tax rate.
 Year 0123 Lease Cash Flows +80,000−30,800−30,000−30,000\begin{array} { | l | c | c | c | c | } \hline \text { Year } & 0 & 1 & 2 & 3 \\\hline \text { Lease Cash Flows } & + 80,000 & - 30,800 & - 30,000 & - 30,000 \\\hline\end{array} What is the value of the lease?

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