The lessee have the same interest and tax rates

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Reference no: EM131936183

1. Assume that both the lessor and the lessee have the same interest and tax rates and there are no transaction costs. Given this, the best lease agreement results in:

n NPV of zero for both parties.

a benefit for the lessor and a zero gain for the lessee.

a benefit for the lessee and a zero gain for the lessor.

a benefit for both parties.

a loss for both parties.

2. Busters is considering leasing some new equipment for 5 years with annual payments of $27,500. The equipment would cost $115,000 to buy and would be depreciated straight-line to a zero salvage value. The actual salvage value is zero. The firm can borrow at 8 percent and has a tax rate of 35 percent. What is the maximum lease payment Busters would be willing to pay?

$28,802.49

$23,708.03

$29,908.16

$24,840.00

$26,709.12

Reference no: EM131936183

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