If a firm can buy a machine for $80,000, takes an investment tax credit of 15%, and lease out the machine for 9 years with lease payments at the beginning of the year,
1) how much should the minimum annual lease payments be? Assume a 5-year straight-line depreciation, zero salvage and a tax rate of 35%. Assume further that it can borrow at a before-tax rate of 7%.
A $10,300
B $8,300
C $9,300
D $9,600
E $8,900
2) Refer to above question. What would the minimum annual lease payments be if the machine can be salvaged for $26400 at the end of the lease?
A $6,500
B $6,800
C $7,100
D $6,100
E $7,600 6
3) Refer to above question. What would the minimum annual lease payments be if the machine can be salvaged for $26400 at the end of the lease and the after-tax required rate of return is 5.85%?
A $7,300
B $8,100
C $8,800
D $8,000
E $7,700
Please show calculation in Excel on how to get the answers and show the function page.