Should the lease be made, Estimated salvage is $10,000. If

Should the lease be made

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Reference no: EM131334958

Darling Leasing is considering the lease to Major State University of a piece of equipment costing $100,000. The period of the lease will be eight years.

The equipment will be depreciated under MACRS rules for 7-year class assets. Darling's marginal tax rate is 40 percent. Annual (end-of-year) lease payments will be $20,000.

Estimated salvage is $10,000. If Darling requires a 20 percent after-tax return on equipment it leases, should the lease be made?

Reference no: EM131334958

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