Solution:
Computation of Present value of Cash outflows for buy and lease option - Kiddy Toy Corporation | ||||
Particulars | Period | Amount | PV Factor | Present Value |
Buying Option: | ||||
Cost of Machine | 0 | $1,65,000.00 | 1 | $1,65,000.00 |
Annual maintenance and insurance cost | 1-10 | $10,000.00 | 5.650223 | $56,502.23 |
Salvage Value | 10 | -$15,000.00 | 0.321973 | -$4,829.60 |
Present value of cash outflows - Buying option | $2,16,672.63 | |||
Leasing Option: | ||||
Annual Lease Rent | 0-9 | $30,000.00 | 6.328250 | $1,89,847.49 |
Present value of cash outflows - Leasing Option | $1,89,847.49 |
Kiddy should choose "Lease option".
Kiddy Toy Corporation needs to acquire the use of a machine to be used in its...
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help Kiddy Toy Corporation needs to acquire the use of a machine to be used in its manufacturing process. The machine needed is manufactured by Lollie Corp. The machine can be used for 10 years and then sold for $15,000 at the end of its useful life. Lollie has presented Kiddy with the following options: (EV of $1. PV of $1. EVA of $1. PVA of $1. EVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables...
Kiddy Toy Corporation needs to acquire the use of a machine to be used in its manufacturing process. The machine needed is manufactured by Lollie Corp. The machine can be used for 10 years and then sold for $27,000 at the end of its useful life. Lollie has presented Kiddy with the following options: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)...
Kiddy Toy Corporation needs to acquire the use of a machine to be used in its manufacturing process. The machine needed is manufactured by Lollie Corp. The machine can be used for 10 years and then sold for $22,000 at the end of its useful life. Lollie has presented Kiddy with the following options: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)...
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