What set of lease payments will make the lessee

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An asset costs $745,000 and will be depreciated in a straight-line manner over its three-year life. It will have no salvage value. The lessor can borrow at 6% and the lessee can borrow at 9 percent. The corporate tax rate is 21 percent for both companies.

a. How does the fact that the lessor and lessee have different borrowing rates affect the calculations of the NAL?

b. What set of lease payments will make the lessee and the lessor equally well off?

c. Assume that the lessee pays no taxes, and the lessor is in the 21 percent tax bracket. For what range of lease payments does the lease have a positive NPV for both parties?

Reference no: EM133069307

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