ZuoTi.Pro
Question

You are working for the finance department at ACME Corp.

You are working for the finance department at ACME Corp. 

You are acquiring equipment and must decide if it is better to do a financial lease or to borrow and buy. Initial cost; $1000 MACRS 3 year depreciation (33.33, 44.45, 14.81, 7.41) Tax rate: 35% Cost of debt: 6% Annual lease payment: $250 

What is the NPV of the lease relative to the borrow and buy?

business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Request Professional Answer

Request Answer!

We need at least 10 more requests to produce the answer.

0 / 10 have requested this problem solution

The more requests, the faster the answer.

Request! (Login Required)

All students who have requested the answer will be notified once they are available.
Know the answer?
Add Answer to:
You are working for the finance department at ACME Corp.
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Similar Homework Help Questions

  • Cash flows estimation and capital budgeting: You are the head of finance department in XYZ Company....

    Cash flows estimation and capital budgeting: You are the head of finance department in XYZ Company. You are considering adding a new machine to your production facility. The new machine’s base price is $10,100.00, and it would cost another $3,280.00 to install it. The machine falls into the MACRS 3-year class (the applicable MACRS depreciation rates are 33.33%, 44.45%, 14.81%, and 7.41%), and it would be sold after three years for $2,150.00. The machine would require an increase in net...

  • Cash flows estimation and capital budgeting: You are the head of finance department in XYZ Company....

    Cash flows estimation and capital budgeting: You are the head of finance department in XYZ Company. You are considering adding a new machine to your production facility. The new machine’s base price is $10,000.00, and it would cost another $2,280.00 to install it. The machine falls into the MACRS 3-year class (the applicable MACRS depreciation rates are 33.33%, 44.45%, 14.81%, and 7.41%), and it would be sold after three years for $1,850.00. The machine would require an increase in net...

  • Please solve, show work, and give detail explanation 4. A firm is considering a new three-year...

    Please solve, show work, and give detail explanation 4. A firm is considering a new three-year expansion project that requires an initial asset investment of $2.7 million. The fixed asset falls into the three-year MACRS class. The project is estimated to generate $2,080,000 in annual sales, with costs of $775,000. The project requires an initial investment in net working capital of $300,000 and the fixed asset will have a market value of $210,000 at the end of the project. If...

  • 4. The lessee's lease analysis Aa Aa Consider the case of Scorecard Corporation: Scorecard Corporation is...

    4. The lessee's lease analysis Aa Aa Consider the case of Scorecard Corporation: Scorecard Corporation is considering the purchase of new manufacturing equipment that will cost $25,000 (including shipping and installation). Scorecard can take out a four-year, $25,000 loan to pay for the equipment at an interest rate of 6.00%. The loan and purchase agreements will also contain the following provisions: • The annual maintenance expense for the equipment is expected to be $250. • The equipment has a four-year...

  • Delia Landscaping is considering a new 4-year project. The equipment necessary would cost $173,000 and be...

    Delia Landscaping is considering a new 4-year project. The equipment necessary would cost $173,000 and be depreciated on a 3-year MACRS to a book value of zero. The MACRS percentages each year are 33.33 percent, 44.45 percent, 14.81 percent, and 7.41 percent, respectively. At the end of the project, the equipment can be sold for 10 percent of its initial cost. The project will have annual sales of $110,000, variable costs of $27,700, and fixed costs of $12,300. The project...

  • The lessor for Dolby Corp is AAA Rental. The following information applies to AAA Rental: The...

    The lessor for Dolby Corp is AAA Rental. The following information applies to AAA Rental: The purchase cost is $350,000. The equipment will be depreciated as MACRS 3-Year Property (DepYR1 = 33.33%; DepYr2 = 44.45%). A two-year maintenance contract will cost $15,000 at the start of each of the two years of ownership. AAA Rental estimates a residual equipment value after two years of use of $200,000 (before taxes). Beginning-of-year rental income will be two lease payments of $150,000 each....

  • The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's...

    The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $890,000, and it would cost another $16,000 to install it. The machine falls into the MACRS 3-year class (the applicable MACRS depreciation rates are 33.33%, 44.45%, 14.81%, and 7.41%), and it would be sold after 3 years for $662,000. The machine would require an increase in net working capital (inventory) of $15,000. The sprayer would not change revenues, but it is...

  • You are considering a new project that requires $300,000 investment in a machine, including installation and...

    You are considering a new project that requires $300,000 investment in a machine, including installation and shipping cost. The life of the machine is three years, and it depreciates via 3-year MACRS methods (33.33%, 44.45%, 14.81%, and 7.41%). If you operate this project, the annual sales of the firm increases by $250,000 a year, and the annual operating expense increased by $100,000. The firm has a marginal tax rate of 34%. In order to start the project, the firm has...

  • Attempts: Keep the Highest: /4 2. The lessee's lease analysis Consider the case of Hack Wellington...

    Attempts: Keep the Highest: /4 2. The lessee's lease analysis Consider the case of Hack Wellington Co. (HWC): Hack Wellington Co. (HWC) is considering the purchase of new manufacturing equipment that will cost $30,000 (including shipping and installation). HWC can take out a 4-year, $30,000 loan to pay for the equipment at an interest rate of 7.20%. The loan and purchase agreements will also contain the following provisions: • The annual maintenance expense for the equipment is expected to be...

  • The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's...

    The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $990,000, and it would cost another $20,000 to install it. The machine falls into the MACRS 3-year class (the applicable MACRS depreciation rates are 33.33%, 44.45%, 14.81%, and 7.41%), and it would be sold after 3 years for $623,000. The machine would require an increase in net working capital (inventory) of $15,500. The sprayer would not change revenues, but it is...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT