Find the present value of the after tax cash outflows

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Lease versus Purchase Decision. Sanchez Co. is considering a capital lease providing additional warehouse space for its department stores. The price of the facility is $330,000. The leasing arrangement requires beginning-of-year payments which, for tax purposes, cannot be deducted until the end of the year. The life of the lease is 5 years and the facility has zero expected salvage value. The lessor wants a 5 percent return on its lease. Assume that the firm is in the 40 percent tax bracket and its after-tax cost of debt is currently 7 percent. Find the present value of the after tax cash outflows using the after-tax cost of debt as the discount rate. Round your answer to the nearest dollar.

Reference no: EM13574595

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