A Machine That Costs $280,000 Would Be Depreciated Using the Straightline

A machine that costs $280,000 would be depreciated using the straightline method by a leasing firm over a period of 3 years.Both the book value and the market value would be zero at the end of the 3 years.Both the lessor and the lessee have a tax rate of 21 percent.What is the NPV of the lease relative to the purchase to the lessor if the applicable pretax cost of borrowing is 7 percent and the lease payments are set at $102,100 annually for 3 years?

A) −$1,025.58
B) −$9,658.92
C) $411.67
D) $882.09
E) $0

Correct Answer:

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