Maximum lease payment that would be acceptable

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InkJet Oil company is trying to decide whether to lease or buy a new drilling system for its natural gas drilling operations. It will provide $2.5 million in annual pretax cost savings. The system costs $8 million and will depreciate over five years straight line to zero. The company’s tax rate is 34% and can borrow at 8%. Grommit leasing company has offered to lease the system to for $1.65 million per year due at the beginning of each year. What is the NAL for Inkjet? What is the maximum lease payment that would be acceptable?

Reference no: EM131360890

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