What is the amount of the break-even lease payment to lessor

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Reference no: EM132073156

Your firm needs to either buy or lease $240,000 worth of vehicles. These vehicles have a life of 4 years after which time they are worthless. The vehicles belong in CCA class 10 (a 30% class) and can be leased at a cost of $70,000 a year for the 4 years.The lease payments are to be made at the beginning of the year. The corporate tax rate is 30% and the cost of debt is 8%. Assume the half-year rule is in effect.

1. What is the net advantage to leasing?

A) $1,109

B) $345

C) $78

D) -$18

E) -$142

2. The lessor in this case has a tax rate of 40% and a cost of debt equal to 7%. What is the net advantage of leasing to the lessor?

A) $626

B) $345

C) $78

D) -$18

E) -$142

3. What is the amount of the break-even lease payment to the lessor?

A) $47,740

B) $51,254

C) $63,334

D) $69,723

E) $74,421

Reference no: EM132073156

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