Problem
Your company must obtain some laser measurement devices for the next six years and is considering leasing. You have been directed to perform an actual dollar after-tax study of the leasing approach. The pertinent information for the study is as follows: Lease costs: First year, $80,000; second year, $60,000; third through sixth years, $50,000 per year. Assume that a six-year contract has been offered by the lessor that fixes these costs over the six-year period. Other costs (not covered under contract): $4,000 in year zero dollars, and estimated to increase 10% each year. Effective income tax rate: 40%.
a. Develop the actual-dollar ATCF for the leasing alternative.
b. If the real MARR (ir) after taxes is 5% per year and the annual inflation rate (f) is 9.524% per year, what is the actual-dollar after-tax equivalent annual cost for the leasing alternative?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.