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Company Z wants to establish a lease for an asset that has a market price of...

Company Z wants to establish a lease for an asset that has a market price of $ 3,000,000 and a tax life of 5 years. The term of the contract is 3 years and the annual rent is $ 1,400,000. In addition, the contract establishes that company Z will acquire the asset at the end of the contract term at a price of $ 100,000. If the credit opening expenses are $ 30,000, the tax rate is 50%, and the average annual inflation in the coming years is 20%, what is the cost of this lease without considering and taking into account inflation ? (Assume a 25% Minimum Acceptable Rate of Return)
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Answer #1

Cost of lease would be $1,714,200 - Also refer the working note for asset acquisiton cost at the right side of the sheet.

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