Reference no: EM131067209
Big sky mining company must install 1.5 million of new machinery in its Nevada mine. it can obtain a bank loan for 100% of the purchase price, or it can lease the machinery. assume that the following facts apply.
1. the machinery falls into the MACRS 3 year class
2. under either the lease or the purchase, big sky must pay for insurance, property taxes and maintenance.
3. the firm tax rate is 4.%
4. the loan would have an interest rate of 15%.it would be nomomortizing, with only interest paid at the end of each year for four years and the principal repaid at year 4
5. the lease term call for $400.000 payment at the end of each of the next 4 years
6. big sky mining has no use for the machine beyond the expiration of the lease, and the machine has an estimated residual value of $250,000 at the end of the 4th year
what is the NAL of the lease ?
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