Would either or both parties be satisfied with lease terms

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Reference no: EM131551495

Assume the CBA Corporation needs a machine costing $50,000, which it plans to use for 5 years. The estimated residual value in 5 years is $5,000. It can borrow the money to buy the asset at a rate of interest of 9%, or it can lease it for $9,000 per year from the ZYX Leasing Company. CBA has a tax rate of 30%. ZYX has a tax rate of 40% and can borrow at a rate of 6%. The asset can be depreciated at the MACRS 4-year rates. CBA would be responsible for maintenance, taxes and insurance whether it leases or borrows the machine. Analyze this lease from CBA’s perspective, and then again from XYZ’s perspective. Explain the results. Would either or both parties be satisfied with the lease terms?

Reference no: EM131551495

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