Problem:
Annual lease payments start at the beginning of the year. Purchase price of machine is $200,000 and will be leased for 5 year period. Straight-line depreciation of 40,000 per year with zero book salvage value; however, salvage value is estimated to actually be $35,000 at the end of 5 yrs. The leasing company is required to earn 14% after tax rate of return on the lease. The lease company uses a tax rate of 40%.
How do I calculate the annual lease payments?