What will be the NPV of cash flows for lessor

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Imagine you are a CFO for a company that is contemplating leasing some machinery cost-$25,200,000 and would be depreciated straight line to zero over 5 years. Because of the state of the economy, both you and the the lessor are evaluating this project for four years. You can lease the machinery for $284,375 per year for four years.

Assume that your tax rate is 54% and that of the lessor is 42%. You can borrow at 4.5% before taxes.

1. What will be the NPV for cash flows for the lessee?

2. What will be the NPV of cash flows for the lessor?

3. What would be the maximum payment that a lessee would be willing to pay?

4. What would be the minimum payment that a lessor would be willing to accept?

5. What would be the minimum payment that a lessor would be willing to accept?

Reference no: EM133305951

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