What is the overall gain from leasing

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Nodhead College needs a new computer. It can either buy it for $260,000 or lease it from Compulease. The lease terms require Nodhead to make six annual payments (prepaid) of $64,000. Nodhead pays no tax. Compulease pays tax at 40%. Compulease can depreciate the computer for tax purposes over five years. The computer will have no residual value at the end of year 5. The interest rate is 10%.

What is the NPV of the lease for Nodhead College?

What is the NPV for Compulease?

What is the overall gain from leasing?

Reference no: EM131059835

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