Your fiRm Is Considering Leasing a New Robotic Milling Control

question 40

Multiple Choice

Your firm is considering leasing a new robotic milling control system.The lease lasts for 5 years.The lease calls for 6 payments of £300,000 per year with the first payment occurring at lease inception.
The black box would cost £1,050,000 to buy and would be straight-line depreciated to a zero salvage.
The actual salvage value is zero.The firm can borrow at 8%, and the corporate tax rate is 34%.
What is the NPV of the lease?

• A)£-111,690
• B)£-295,040
• C)£-305,388
• D)£-309,690
• E)None of the above.

---

Definitions:

Current Yield

is the annual income (interest or dividends) divided by the current price of the security, used to assess the return of an investment.

Market Price

The prevailing market price for an asset or service available for trade or acquisition.

Semiannual Coupon Rate

The interest rate on a bond or fixed-income security that is paid out to investors twice a year.

Current Yield

This term denotes the annual income (interest or dividends) divided by the current price of the security, often used in reference to bonds.