Desires to lease numerically controlled milling machine

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Reference no: EM131183592

The Jacobs company desires to lease a numerically controlled milling machine costing $200,000. Jacobs has asked both First Manufacters Bank Leasing Corporation and Commercial Associates, Inc to quote an annual lease rate. Both leasing companies now require 20 percent pretax rate of return on this type of lease. Suppose First Manufacterures estimates the machine's salvage value to be $30,000 and Commercial Associates estimate salvage to be $80,000. Based on this information, what annual (beggining of the year) lease payments will each leasing company require, if the lease term is 5 years? (Note: Becasue the required rate of return of both is stated on a pretax basis, you need not consider depreciation or the tax effects of salvage.)

Reference no: EM131183592

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