Your Firm Is Considering Leasing a New Robotic Milling Control

question 27

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 system would cost $1,050,000 to buy and would be straight-line depreciated to a zero salvage value. The actual salvage value is zero. The firm can borrow at 8%,and the corporate tax rate is 34%. What is the maximum lease payment that you would be willing to make?

• A) $170,655
• B) $175,000
• C) $187,842
• D) $210,307
• E) None of these.

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Definitions:

Net Income

The total earnings of a company after subtracting all expenses from revenues, including taxes and interest.