You work for a nuclear research laboratory that is contemplating leasing a diagn

Question

You work for a nuclear research laboratory that is contemplating leasing a diagnostic
scanner (leasing is a very common practice with expensive, high-tech equipment). The
scanner costs $6,300,000, and it would be depreciated straight-line to zero over four
years. Because of radiation contamination, it will actually be completely valueless in four
years. You can lease it for $1,875,000 per year for four years.

   Taxes and Leasing Cash Flows [LO3] Assume that your company does not antici-
pate paying taxes for the next several years. What are the cash f ows from leasing in
this case?

Explanation / Answer

IF THE EQUIPMENT LEASES OUT 1875000 PER YEAR IT WILL SPEND =7500000

AFTER 4 YEARS . SO CASH OUT FOR NEXT 4 YEAR WILL BE

1T YEAR = 1875000, 2N 1875000, 3RD 1875000, 4TH 1875000

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