Ajax Is Considering Leasing a $900,000 Equipment

Ajax is considering leasing a $900,000 equipment.Five annual payments of $190,000 are due in advance.Ajax's required rate of return is 12% and has a 35% tax rate.The asset is in the 25% CCA class.The half year rule applies and CCA is taken in year 0.After the fifth year, the asset becomes worthless.Determine the NPV of the lease.
$$\begin{array}{l}\begin{array} { | l | r | } \hline \text { DATA: }\\\hline \text { Equipment value } & 900,000 \\\hline \text { Lease payments } & 190,000 \\\hline \text { Number of lease payments } & 5 \\\hline \text { Tax rate } & 35 \% \\\hline \text { CCA rate } & 25 \% \\\hline \text { Rate of interest } & 12.00 \% \\\hline \text { After tax rate of interest } & 7.80 \% \\\hline\end{array}\end{array}$$

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