XYZ Ltd Intends to Lease to Another Company for a Duration

question 27

Multiple Choice

XYZ Ltd intends to lease to another company for a duration of five years equipment which costs $500 000 and can be depreciated straight-line over three years for tax purposes.Assume the cost of capital is 10% p.a. ,the residual value is 20 per cent of cost,the tax rate is 30 per cent and that annual lease payments are payable in advance.Calculate the minimum before-tax lease payments that XYZ Ltd should quote if it desires a rate of return of 10 per cent after tax.

• A)$153 907
• B)$140 451
• C)$110 680
• D)$132 360

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Definitions:

Gamete

A mature sexual reproductive cell, such as a sperm or egg, that unites with another cell to form a new organism.

Allele

A variation of a gene that influences an individual’s characteristics.

Genes

Biological units of heredity located in DNA, responsible for governing traits and characteristics passed from parents to offspring.

Chromosome

One of 46 rod-like molecules that contain 23 pairs of DNA found in every body cell and collectively contain all of the genes.