Nodhead college needs a new computer it can either buy it, Ask an Expert

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Nodhead College needs a new computer. It can either buy it for $250,000 or lease it from Compulease. The lease terms require Nodhead to make six annual payments (prepaid) of $62,000. Nodhead pays no tax. Compulease pays tax at 35%. Compulease can depreciate the computer for tax purposes using 5-year MACRS. The computer will have no residual value at the end of year 5. The interest rate is 8%.

a. What is the NPV of the lease for Nodhead College?

b. What is the NPV for Compulease?

c. What is the overall gain from leasing?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92871502

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