Contech (lessee) wishes to lease a printing press valued at $60,000 from Wrenn C

Question

Contech (lessee) wishes to lease a printing press valued at $60,000 from Wrenn Capital (lessor) for a period of 4 years. Wrenn expects to depreciate the asset on a straight-line basis to a salvage value of $0. Actual salvage value is expected to be $8,000 at the end of 4 years. If Wrenn requires a 12 percent after-tax rate of return on the lease, what is the lessor's amount to be amortized? Assume Wrenn's marginal tax rate is 40%.

$60,000

$38,725

$41,778

$36,690

$60,000

$38,725

$41,778

$36,690

Explanation / Answer

$38,725

$38,725

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