Compute required annual beginning-of-the-year lease payments

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Reference no: EM13926809

MB Leasing has been asked to quote a lease rate for a new computer system for Hastings Distribution Company. The system will cost $385,000 and will be leased by MB Leasing for 5 years. Lease payments will be made at the beginning of each year. MB Leasing will depreciate the system on a straight-line basis of $77,000 per year down to a book salvage value of $0. Actual salvage value at the end of 5 years is estimated to be $52,500. MB Leasing's marginal tax rate is 40 percent. MB Leasing requires a 12 percent after-tax rate of return on this lease. Determine the required annual beginning-of-the-year lease payments.

Reference no: EM13926809

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