Your firm is considering leasing a new robotic milling control system. The lease last for 5 years. The lease calls for 6 payments of $300,000 per year with the first payment occurring at lease inception. The system would cost $1,050,000 to buy and would be straight-line depreciated to a zero salvage value. The firm can borrow at 8%, and the corporate tax rate is 34%.
(a) What is the NPV of the lease?
(b) What is the maximum lease payment that you would be willing to make?
(c) What is the minimum lease payment that the lessor would be willing to accept?
"Please show simplified working for question b and c thanks. That is giving me problems to conceptualize".
THE LEASE IS 5 YEARS