You Work for a Nuclear Research Laboratory That Is Contemplating

question 49

Multiple Choice

You work for a nuclear research laboratory that is contemplating leasing a diagnostic scanner (leasing is a very common practice with expensive,high-tech equipment) .The scanner costs $3 million and it would be depreciated straight-line to zero over 4 years.Because of radiation contamination,it will actually be completely valueless in 4 years.You can lease it for $750,000 per year for 4 years.Assume the tax rate is 31 percent.You can borrow at 8 percent before taxes.Your company does not expect to pay taxes for the next several years,but the leasing company will pay taxes.What range of lease payments will allow the lease to be profitable for both parties?

• A)$904,026 to $905,123
• B)$904,026 to $905,481
• C)$904,026 to $905,762
• D)$905,123 to $906,417
• E)$905,123 to $906,825

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