The Wildcat Oil Company is trying to decide whether to lease or buy a new computer-assisted drilling system for its oil exploration business. Management has decided that it must use the system to stay competitive; it will provide $3.4 million in annual pretax cost savings. The system costs $7.5 million and will be depreciated straight-line to zero over five years. Wildcat's tax rate is 24 percent, and the firm can borrow at 8 percent. Lambert Leasing Company has offered to lease the drilling equipment to Wildcat for payments of $1.71 million per year. Lambert's policy is to require its lessees to make payments at the start of the year. Suppose Lambert requires Wildcat to pay a $375,000 security deposit at the inception of the lease. |
Calculate the NAL with the security deposit. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answer in dollars, not millions, rounded to 2 decimal places, e.g., 1,234,567.89. |
The Wildcat Oil Company is trying to decide whether to lease or buy a new computer-assisted...
The Wildcat Oil Company is trying to decide whether to lease or buy a new computer-assisted drilling system for its oil exploration business. Management has decided that it must use the system to stay competitive; it will provide $2.4 million in annual pretax cost savings. The system costs $7.1 million and will be depreciated straight-line to zero over five years. Wildcat's tax rate is 23 percent, and the firm can borrow at 8 percent. Lambert Leasing Company has offered to...
The Wildcat Oil Company is trying to decide whether to lease or buy a new computer-assisted drilling system for its oil exploration business. Management has decided that it must use the system to stay competitive; it will provide $3.7 million in annual pretax cost savings. The system costs $8.8 million and will be depreciated straight-line to zero over its five-year life, after which it will be worthless. Wildcat’s tax rate is 22 percent and the firm can borrow at 9...
The Wildcat Oil Company is trying to decide whether to lease or buy a new computer-assisted drilling system for its oil exploration business. Management has decided that it must use the system to stay competitive; it will provide $2.3 million in annual pretax cost savings. The system costs $8.2 million and will be depreciated straight-line to zero over five years. Wildcat's tax rate is 24 percent, and the firm can borrow at 6 percent. Lambert Leasing Company is willing to...
The Wildcat Oil Company is trying to decide whether to lease or buy a new computer- assisted drilling system for its oil exploration business. Management has decided that it must use the system to stay competitive; it will provide $3.1 million in annual pretax cost savings. The system costs $8.1 million and will be depreciated straight-line to zero over five years. Wildcat's tax rate is 21 percent and the firm can borrow at 6 percent. Lambert's policy is to require...
The Wildcat Oil Company is trying to decide whether to lease or buy a new computer-assisted drilling system for its oil exploration business. Management has decided that it must use the system to stay competitive; it will provide $2.4 million in annual pretax cost savings. The system costs $9.4 million and will be depreciated straight-line to zero over its five-year life. Wildcat’s tax rate is 34 percent, and the firm can borrow at 8 percent. Lambert Leasing Company has offered...
The Wildcat Oil Company is trying to decide whether to lease or buy a new computer-assisted drilling system for its oil exploration business. Management has decided that it must use the system to stay competitive; it will provide $3.3 million in annual pretax cost savings. The system costs $8.3 million and will be depreciated straight-line to zero over five years. Wildcat’s tax rate is 23 percent and the firm can borrow at 8 percent. Lambert’s policy is to require its...
New Oil Co. is considering replacement of their highly specialised drilling equipment. The new equipment is computer assisted and therefore provides New Oil with $2.9 million in annual pre-tax savings. New Oil can purchase the equipment at $9.7 million which will be depreciated straight-line to zero over five years. The local bank is prepared to provide New Oil with $2.9 million loan at an interest rate of 9 percent with annual repayments spread over five years. Alternatively, New Oil can...