The Wildcat Oil Company is trying to decide whether to lease or buy a new computer-assisted...

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The Wildcat Oil Company is trying to decide whether to lease orbuy a new computer-assisted drilling system for its oil explorationbusiness. Management has decided that it must use the system tostay competitive; it will provide $4.8 million in annual pretaxcost savings. The system costs $9.8 million and will be depreciatedstraight-line to zero over five years. Wildcat’s tax rate is 23percent and the firm can borrow at 7 percent. Lambert’s policy isto require its lessees to make payments at the start of theyear.

Suppose it is estimated that the equipment will have an aftertaxresidual value of $1,060,000 at the end of the lease. What is themaximum lease payment acceptable to Wildcat? (Do not roundintermediate calculations and enter your answer in dollars, notmillions of dollars, rounded to 2 decimal places, e.g.,1,234,567.89.)

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The Wildcat Oil Company is trying to decide whether to lease orbuy a new computer-assisted drilling system for its oil explorationbusiness. Management has decided that it must use the system tostay competitive; it will provide $4.8 million in annual pretaxcost savings. The system costs $9.8 million and will be depreciatedstraight-line to zero over five years. Wildcat’s tax rate is 23percent and the firm can borrow at 7 percent. Lambert’s policy isto require its lessees to make payments at the start of theyear. Suppose it is estimated that the equipment will have an aftertaxresidual value of $1,060,000 at the end of the lease. What is themaximum lease payment acceptable to Wildcat? (Do not roundintermediate calculations and enter your answer in dollars, notmillions of dollars, rounded to 2 decimal places, e.g.,1,234,567.89.)