Subsequent cash flows are paid at beginning of each period

Assignment Help Financial Management

Reference no: EM132020950

1. Your firm is considering leasing a new computer. The lease lasts for 8 years. The lease calls for 8 payments of $8,000 per year with the first payment occurring immediately. The computer would cost $50,000 to buy and would be straight-line depreciated to a zero over 8 years. The actual pre-tax salvage value is $3,000. The firm can borrow at a rate of 5%. The corporate tax rate is 34%. What would the NPV of the lease relative to the purchase be?

-$2,780.42

-$4,064.08

-$3,927.15

$2,318.71

$3,061.26

2. Which of the following securities assumes all subsequent cash flows are paid at the beginning of each period?

a. lump sum cash flow

b. perpetuity

c. ordinary annuity

d. annuity due

Reference no: EM132020950

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