Over what range of lease payments will the lease be


You work for a nuclear research laboratory that is contemplating leasing a diagnostic scanner (leasing is a very common practice with expensive, high-tech equipment). The scanner costs $7,410,000, and it would be depreciated straight-line to zero over five years. Because of radiation contamination, it will actually be completely valueless in five years. Assume the tax rate is 35 percent. The borrowing rate is 12 percent before taxes. Your company does not expect to pay taxes for the next several years, but the leasing company will pay taxes. Over what range of lease payments will the lease be profitable for both parties?

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Financial Management: Over what range of lease payments will the lease be
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