Your company is considering the purchase of a fleet of cars for $200,000. It can borrow at 11%. The cars will be used for four years. At the end of four years they will be worthless. You call a leasing agent and find that the cars can be leased for $55,000 per year. The corporate tax rate is 40% and the cars belong in CCA class 10 (a 30% class), what is the net advantage to leasing?
Select one:
a. $7,771
b. $16,217
c. $12,313
d. $5,399
e. $10,075
We need at least 9 more requests to produce the answer.
1 / 10 have requested this problem solution
The more requests, the faster the answer.
I NEED STEP BY STEP SOLUTION PLEASE AND THANK YOU Your firm needs to either buy or lease $240,000 worth of vehicles. These vehicles have a life of 4 years after which time they are worthless. The vehicles belong in CCA class 10 (a 30% class) and can be leased at a cost of $70,000 a year for the 4 years. The lease payments are to be made at the beginning of the year. The corporate tax rate is 30%...
A university student painter is considering the purchase of a new air compressor and paint gun to replace an old paint sprayer. (Both items belong to Class 9 and have a 25% CCA rate.) These two new items cost $12,600 and have a useful life of four years, at which time they can be sold for $2,200. The old paint sprayer can be sold now for $560 and could be scrapped for $310 in four years. The entrepreneurial student believes...
To finance some manufacturing tools it needs for the next 3 years, Waldrop Corporation is considering a leasing arrangement. The tools will be obsolete and worthless after 3 years. The firm will depreciate the cost of the tools on a straight-line basis over their 3-year life. It can borrow $4,900,000, the purchase price, at 8% and buy the tools, or it can make 3 equal end-of-year lease payments of $2,050,000 each and lease them. The loan obtained from the bank...
A university student painter is considering the purchase of a new air compressor and paint gun to replace an old paint sprayer. (Both items belong to Class 9 and have a 25 percent CCA rate.) These two new items cost $12,000 and have a useful life of four years, at which time they can be sold for $1,600. The old paint sprayer can be sold now for $500 and could be scrapped for $250 in four years. The entrepreneurial student...
You work for a nuclear research laboratory that is contemplating leasing a diagnostic scanner (leasing is a common practice with expensive, high-tech equipment). The scanner costs $5,300,000 and would be depreciated straight-line to zero over four years. Because of radiation contamination, it will actually be completely valueless in four years. You can lease it for $1,585,000 per year for four years. Assume that the tax rate is 24 percent. You can borrow at 8 percent before taxes. Calculate the NAL....
An asset has an installed cost of $250,000, a life of 5 years, a CCA rate of 30%, and a salvage value of $5,000. This asset can be leased for 5 years at a rate of $50,000 per year, payable at the beginning of each year. The lessee's marginal tax rate is 35% and borrowing cost is 10%. What is the net advantage to leasing for the lessee? Round your answer to the nearest dollar. $33,839 $52,652 $37,488 -$43,613 $49,548
An asset has an installed cost of $250,000, a life of 5 years, a CCA rate of 30%, and a salvage value of $5,000. This asset can be leased for 5 years at a rate of $50,000 per year, payable at the beginning of each year. The lessee's marginal tax rate is 35% and borrowing cost is 10%. What is the net advantage to leasing for the lessee? Round your answer to the nearest dollar. -$43,613 $33,839 $37,488 $49,548 $52,652
Judson Industries is considering a new project. The project will initially require $749,000 for new fixed assets, $238,000 for additional inventory, and $25,000 for additional accounts receivable. Accounts payable is expected to increase by $70,001. The fixed assets will belong in a 30% CCA class. At the end of the project, in four years' time, the fixed assets can be sold for 40% of their original cost. The net working capital will return to its original level at the end...
Problem 2 EM Industries is considering a new project involving the acquisition of a new machine that would replace an older machine currently in use. The new machine costs $750,000 (at t-0) and can be sold at the end of its expected 4-year operating life for $100,000 (at t-4). The new machine takes up more space and EM will need to move maintenance and cleaning supplies that used to be stored next to the machine to a small storage room...
Big Bucks Inc. (BBI) has decided to replace its outdated computer system, which has no resale value. It is now considering two choices: (i) purchase the necessary computers or (ii) lease all the computers. Purchase option The computers cost $200,000 and will be sold for $10,000 at the end of Year 4. The CCA rate on the computers is 45%. BBI will incur pre-tax maintenance costs of $10,000 per year. These operating costs are incurred at year end. BBI can...