1. You work for a nuclear research laboratory that iscontemplating leasing a diagnostic scanner (leasing is a commonpractice with expensive, high-tech equipment). The scanner costs$5,500,000 and would be depreciated straight-line to zero over fiveyears. Because of radiation contamination, it will actually becompletely valueless in five years. You can lease it for $1,320,000per year for five years. Assume that the tax rate is 21 percent.You can borrow at 7 percent before taxes.

Calculate the NAL.

2.You work for a nuclear research laboratory that iscontemplating leasing a diagnostic scanner (leasing is a commonpractice with expensive, high-tech equipment). The scanner costs$5,300,000 and would be depreciated straight-line to zero over fouryears. Because of radiation contamination, it will actually becompletely valueless in four years. Assume that the tax rate is 24percent. You can borrow at 8 percent before taxes.

What would the lease payment have to be for both the lessor andthe lessee to be indifferent about the lease?

3.

Witten Entertainment is considering buying a machine that costs$548,000. The machine will be depreciated over five years by thestraight-line method and will be worthless at that time. Thecompany can lease the machine with year-end payments of $143,000.The company can issue bonds at an interest rate of 8 percent. Thecorporate tax rate is 23 percent.

What is the NAL of the lease?