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How much should the company make the annual lease payments

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Question - An Ottawa based company, Taggurt Construction Corporation plans to lease a $820,000 bulldozer to the LRT Corporation. The lease will be for 12 years. Lease payments are payable at the beginning of the year. Use Excel functions calculate the following:

a. If Taggurt desires a 14 percent return on its investment, how much should the company make the annual lease payments for?

b. How much would the lease payments be if the payments are to be made at the end of the year rather than at the beginning?

c. Explain why the amount calculated in a) above differs to the amount in calculated in b.

d. If Taggurt is able to generate $125,000 in immediate tax shield benefits on the bulldozer purchased for the lease arrangement and will pass the benefits along to the LRT Corporation in the form of lower lease payments, how much should the revised lease payments be? Assume that Taggurt still wants a 14 percent return on the 12-year lease.

Reference no: EM133081407

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