A manufacturing company wants to acquire a new closed circuit TV (CCTV) system. The new CCTV...
- A manufacturing company wants to acquire a new closed circuit TV (CCTV) system. The new CCTV system can be purchased or it can be leased from the building in which the company has recently moved. If purchased, the system will cost $87,500 and will have a useful life of 5 years with no market value at that time. The annual operating cost is expected to be $52,000 per year. To lease the system, the company must pay a nonrefundable deposit of $21,500, an end-of-year leasing fee of $20,000, and an additional annual inspection and maintenance cost of $1000. Additionally, the operating costs incurred by the company will be reduced to $3400 per year. The company's after tax MARR is 10% per year and the effective income tax rate is 36% per year. Determine whether the company should purchase or lease the CCTV system. Assume straight-line depreciation with zero salvage value and a study period of 5 years.
Homework Answers
Cost under lease option is less as compared to buy option. so company must opt for Lease option..
Note : I solved this question as per the information given. but there is something wrong with this question.
Buy Option : After buying CCTV for 87,500 i has to incure 52000 Annual maintaineance Cost.
Lease Option : After paying initial non-refundable deposit i has to pay
- annual lease rent of 20000 +
- Additional Inspection charges 1000+
- Annual operating cost of 3400 (word reduced to 3400 is used in question )
i.e. 24,400
Both the figures 1st - 87500 + annual 52400 and 2nd - 21000+ annual 24400 are apparently incomparable...
If there is any inconsistency in figure kindly change that figure in above mentioned solution.
Add Answer to:
A manufacturing company wants to acquire a new closed circuit
TV (CCTV) system. The new CCTV...
An electronics company estimated the investment cost for equipment for producing replacement CCTV will be $800,000....
An electronics company estimated the investment cost for equipment for producing replacement CCTV will be $800,000. The operating and maintenance cost is expected to be $500,000 per year with an annual revenues estimated at $650,000. :Considering MARR of 15% per year, find The simple payback period=.......years The discounted payback period=......years
10 points An electronics company estimated the investment cost for equipment for producing replacement CCTV will...
10 points An electronics company estimated the investment cost for equipment for producing replacement CCTV will be $800,000. The operating and maintenance cost is expected to be $500,000 per year with an annual revenues esumated at $650,000. Considering MARR of 15 per year, ind The simple payback penod -years The discounted payback period.....years
Your company has to obtain some new production equipment to be used for the next ten years, and leasing is being considered. You have been directed to perform an after-tax study of the leasing approa...
Your company has to obtain some new production equipment to be used for the next ten years, and leasing is being considered. You have been directed to perform an after-tax study of the leasing approach. The data information for the study is as follows: Lease cost: First year, S70,000; second year, S60,000; third through ten years, S50,000 per year. Assume that a 10-year contract has been offered by the lessor that fixes these costs over the 10- year period. Other...
A construction company is considering to acquire a new equipment.Table 1 is the information of two...
A construction company is considering to acquire a new
equipment.Table 1 is the information of two alternatives for this
new equipment. Complete the following questions according to the PW
analysis The after tax market minimum attractive acquire
(1) which alternative should the company acquire?
(2)if the inflation rate is 2% per year and the base year is
year 0,whic company should you choose?
PW
is Present Value
use Present Value method to analyze
Table 1 Capital investment А 9000 в...
A small strip-mining coal company is trying to decide whether it should purchase or lease a...
A small strip-mining coal company is trying to decide whether it should purchase or lease a new clamshell. If purchased, the "shell" will cost $177,500 and is expected to have a $50,000 salvage value after 6 years. Alternatively, the company can lease a clamshell for only $17,000 per year, but the lease payment will have to be made at the beginning of each year. If the clamshell is purchased, it will be leased to other strip-mining companies whenever possible, an...
A construction company is considering whether to lease or buy equipment for its new 4-year projec...
please answer them all and mark the answers . thanks
A construction company is considering whether to lease or buy equipment for its new 4-year project. If they buy the equipment, it will have an initial investment cost of $630,000 with annual costs of $42.000. At the end of the 4 years the equipment can be sold for an estimated $378,000. For tax purposes, the company will use MACRS-ADS depreciation on the equipment. If they decide to lease, it will...
6. In 2018, a certain manufacturing company has some existing semi-automated production equipment...
6. In 2018, a certain manufacturing company has some existing semi-automated production equipment which they are considering replacing. This equipment has a present and a book valth orsimen ive years tromnw eny a Me) espense and other relaltor the new equipment are S12 100 five years Based on an market value of S58,000 and a book value of $35,000. It has five more years of straight-line depreciation available (if kept) of $7,000 per year, at which time its BV would...
Lewis Securities Inc. has decided to acquire a new market data and quotation system for its...
Lewis Securities Inc. has decided to acquire a new market data and quotation system for its Richmond home office. The system receives current market prices and other information from several online data services and then either displays the information on a screen or stores it for later retrieval by the firm’s brokers. The system also permits customers to call up current quotes on terminals in the lobby. The equipment costs $1,000,000 and, if it were purchased, Lewis could obtain a...
Problem 05.031 Future Worth Analysis A small strip-mining coal company is trying to decide whether it...
Problem 05.031 Future Worth Analysis A small strip-mining coal company is trying to decide whether it should purchase or lease a new clamshell. If purchased, the "shell" will cost $145,000 and is expected to have a $37,500 salvage value after 6 years. Alternatively, the company can lease a clamshell for only $20,000 per year, but the lease payment will have to be made at the beginning of each year. If the clamshell is purchased, it will be leased to other...
Lewis Securities Inc. has decided to acquire a new market data and quotation system for its...
Lewis Securities Inc. has decided to acquire a new market data and quotation system for its Richmond home office. The system receives current market prices and other information from several online data services and then either displays the information on a screen or stores it for later retrieval by the firm’s brokers. The system also permits customers to call up current quotes on terminals in the lobby. The equipment costs $1,000,000 and, if it were purchased, Lewis could obtain a...
An electronics company estimated the investment cost for equipment for producing replacement CCTV will be $800,000. The operating and maintenance cost is expected to be $500,000 per year with an annual revenues estimated at $650,000. :Considering MARR of 15% per year, find The simple payback period=.......years The discounted payback period=......years
10 points An electronics company estimated the investment cost for equipment for producing replacement CCTV will be $800,000. The operating and maintenance cost is expected to be $500,000 per year with an annual revenues esumated at $650,000. Considering MARR of 15 per year, ind The simple payback penod -years The discounted payback period.....years
Your company has to obtain some new production equipment to be used for the next ten years, and leasing is being considered. You have been directed to perform an after-tax study of the leasing approach. The data information for the study is as follows: Lease cost: First year, S70,000; second year, S60,000; third through ten years, S50,000 per year. Assume that a 10-year contract has been offered by the lessor that fixes these costs over the 10- year period. Other...
A construction company is considering to acquire a new
equipment.Table 1 is the information of two alternatives for this
new equipment. Complete the following questions according to the PW
analysis The after tax market minimum attractive acquire
(1) which alternative should the company acquire?
(2)if the inflation rate is 2% per year and the base year is
year 0,whic company should you choose?
PW
is Present Value
use Present Value method to analyze
Table 1 Capital investment А 9000 в...
A small strip-mining coal company is trying to decide whether it should purchase or lease a new clamshell. If purchased, the "shell" will cost $177,500 and is expected to have a $50,000 salvage value after 6 years. Alternatively, the company can lease a clamshell for only $17,000 per year, but the lease payment will have to be made at the beginning of each year. If the clamshell is purchased, it will be leased to other strip-mining companies whenever possible, an...
please answer them all and mark the answers . thanks
A construction company is considering whether to lease or buy equipment for its new 4-year project. If they buy the equipment, it will have an initial investment cost of $630,000 with annual costs of $42.000. At the end of the 4 years the equipment can be sold for an estimated $378,000. For tax purposes, the company will use MACRS-ADS depreciation on the equipment. If they decide to lease, it will...
6. In 2018, a certain manufacturing company has some existing semi-automated production equipment which they are considering replacing. This equipment has a present and a book valth orsimen ive years tromnw eny a Me) espense and other relaltor the new equipment are S12 100 five years Based on an market value of S58,000 and a book value of $35,000. It has five more years of straight-line depreciation available (if kept) of $7,000 per year, at which time its BV would...
Problem 05.031 Future Worth Analysis A small strip-mining coal company is trying to decide whether it should purchase or lease a new clamshell. If purchased, the "shell" will cost $145,000 and is expected to have a $37,500 salvage value after 6 years. Alternatively, the company can lease a clamshell for only $20,000 per year, but the lease payment will have to be made at the beginning of each year. If the clamshell is purchased, it will be leased to other...
Most questions answered within 3 hours.
-
han discusses the racist practice of badlands, a bar
in the Castro
district of San Francisco,...
asked 3 minutes ago -
A sample of final exam scores is normally distributed with a
mean equal to 25 and...
asked 7 minutes ago -
An investor shorts 100 shares of a stock when the share price is
$50 and closes...
asked 11 minutes ago -
LLOP corporation just paid 4$ dividend per share, you expect the
dividend to grow 8% for...
asked 20 minutes ago -
if we subtract 1000 from 0001 is there overflow? (binary)
asked 28 minutes ago -
Hello, I need help with the function below, The language I am
using is Ocaml
open...
asked 30 minutes ago -
Explain how the presence of glucose represses the gal structural
genes?
asked 37 minutes ago -
For the reaction CaI2+2AgNO3⟶2AgI+Ca(NO3)2 how many grams of
silver iodide, AgI, are produced from 56.5 g...
asked 49 minutes ago -
Write an equation for hydrolysis via acid catalysis.
Using ethyl acetate, ethyl benzoate, ethyl formate or...
asked 57 minutes ago -
Only one graph is needed.
(a) Draw a Supply Curve and the Demand Curve for the...
asked 1 hour ago -
Fill in the blanks and please show how you arrived at numerical
answers
. The...
asked 1 hour ago -
91. If the half – life of a sample of radioactive
material is 60 days, what...
asked 1 hour ago