Question

Acme has branched out to rentals of office furniture to start-up companies. Consider a $4,300 desk. Desks last for six years and can be depreciated on a five-year MACRS schedule. Assume that lease rates for old and new desks are the same and that Acme’s pretax administrative costs are $660 per desk at the beginning of each year. The cost of capital is 10% and the tax rate is 34%. Lease payments are made in advance, that is, at the start of each year. The inflation rate is zero. What is the break-even operating lease rate for a new desk? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Break-even operating lease rate $_____

Answer 1

It was expensive. A desk is usually around 800$.

Explanation: The desk at Costco is usually cheaper.