Winnipeg Lake Cruisers Wants to Lease Two New Boats from MidWest

Multiple Choice

Winnipeg Lake Cruisers wants to lease two new boats from MidWest Leasing. The cost of the boats is$2 100 000 and the boats have an expected life of 15 years, which is also the term of the financial lease. MidWest's cost of capital is 6% and its tax rate is 45%. The combined Present Value of the tax shield from CCA, the salvage and the tax shield lost due to salvage is $825,783. What is the minimum annual lease payment MidWest can set and earn its required rate of return?

A) $187 749
B) $201 432
C) $215 077
D) $167 055