Big Sky Mining Company must install $1.5 million of new machinery in its Nevada mine. It can obta...
Big Sky Mining Company must install $1.5 million of new machinery in its Nevada mine. It can obtain a bank loan for 100% of the purchase price, or it can lease the machinery. Assume that the following facts apply:
- The machinery falls into the MACRS 3-year class.
- Under either the lease or the purchase, Big Sky must pay for insurance, property taxes, and maintenance.
- The firm's tax rate is 40%.
- The loan would have an interest rate of 13%. It would be nonamortizing, with only interest paid at the end of each year for four years and the principal repaid at Year 4.
- The lease terms call for $400,000 payments at the end of each of the next 4 years.
- Big Sky Mining has no use for the machine beyond the expiration of the lease, and the machine has an estimated residual value of $300,000 at the end of the 4th year.
| MACRS | |
| Year | Allowance Factor |
| 1 | 0.3333 |
| 2 | 0.4445 |
| 3 | 0.1481 |
| 4 | 0.0741 |
What is the NAL of the lease? Round your answer to the nearest dollar.
Homework Answers
Add Answer to:
Big Sky Mining Company must install $1.5 million of new machinery in its Nevada mine. It can obta...
Lease versus Buy Big Sky Mining Company must install $1.5 million of new machinery in its...
Lease versus Buy Big Sky Mining Company must install $1.5 million of new machinery in its Nevada mine. It can obtain a bank loan for 100% of the purchase price, or it can lease the machinery. Assume that the following facts apply: 1. The machinery falls into the MACRS 3-year class. (The depreciation rates for Year 1 through Year 4 are equal to 0.3333, 0.4445, 0.1481, and 0.0741.) 2. Under either the lease or the purchase, Big Sky must pay...
Lease versus Buy Big Sky Mining Company must install $1.5 million of new machinery in its...
Lease versus Buy Big Sky Mining Company must install $1.5 million of new machinery in its Nevada mine. It can obtain a bank loan for 100% of the purchase price, or it can lease the machinery. Assume that the following facts apply: 1. The machinery falls into the MACRS 3-year class. (The depreciation rates for Year 1 through Year 4 are equal to 0.3333, 0.4445, 0.1481, and 0.0741.) 2. Under either the lease or the purchase, Big Sky must pay...
Lease versus Buy Big Sky Mining Company must install $1.5 million of new machinery in its...
Lease versus Buy Big Sky Mining Company must install $1.5 million of new machinery in its Nevada mine. It can obtain a bank loan for 100% of the purchase price, or it can lease the machinery. Assume that the following facts apply: 1. The machinery falls into the MACRS 3-year class. (The depreciation rates for Year 1 through Year 4 are equal to 0.3333, 0.4445, 0.1481, and 0.0741.) 2. Under either the lease or the purchase, Big Sky must pay...
Lease versus Buy Big Sky Mining Company
Lease versus BuyBig Sky Mining Company must install $1.5 million of new machinery in its Nevada mine. It can obtain a bank loan for 100% of the purchase price, or it can lease the machinery. Assume that the following facts apply:The machinery falls into the MACRS 3-year class. (The depreciation rates for Year 1 through Year 4 are equal to 0.3333, 0.4445, 0.1481, and 0.0741.)Under either the lease or the purchase, Big Sky must pay for insurance, property taxes, and...
Big Sky Mining Company must install $1.5 million of new machinery in its' Nevada mine
Big Sky Mining Company must install $1.5 million of new machinery in its' Nevada mine. It can obtain a bank loan for 100% of the purchase price, or it can lease the machinery. The lease would qualify as a guidline lease for tax purposes. Also, assume no maintenance charges. Assume that the following facts apply:
Sullivan-Swift Mining Company must install $1.4 million of new machinery in its Nevada mine. It can...
Sullivan-Swift Mining Company must install $1.4 million of new machinery in its Nevada mine. It can obtain a bank loan for 100% of the required amount. Alternatively, a Nevada investment banking firm that represents a group of investors believes that it can arrange for a lease financing plan. Assume that the following facts apply: 1. The equipment falls in the MACRS 3-year class. The applicable MACRS rates are 33%, 45%, 15%, and 7%. 2. Estimated maintenance expenses are $65,000 per...
Carmichael Cleaners needs a new steam finishing machine that costs $100,000. The company is evaluating whether...
Carmichael Cleaners needs a new steam finishing machine that costs $100,000. The company is evaluating whether it should lease or purchase the machine. The equipment falls into the MACRS 3-year class, and it would be used for 3 years and then sold, because the firm plans to move to a new facility at that time. The estimated value of the equipment after 3 years is $30,000. A maintenance contract on the equipment would cost $3,000 per year, payable at the...
Sadik Industries must install $ 1 million of new machinery in its Texas plant. it can...
Sadik Industries must install $ 1 million of new machinery in its Texas plant. it can obtain a bank loan for 100% of the required amount. Alternatively , a Texas investment banking firm that represents a group of investors believes it can arrange for a lease financing plan. Assume that the following facts apply. 1) The equipment falls in the MACRS 3 year clss 2) Estimated maintenance expenses are $ 50,000 3) The firms's tax rate is 34% 4) If...
Sadik Industries must install $1 million of new machinery in its Texas plant. It can obtain...
Sadik Industries must install $1 million of new machinery in its Texas plant. It can obtain a bank loan for 100% of the required amount. Alternatively, a Texas investment banking firm that represents a group of investors believes it can arrange for a lease financing plan. Assume that the following facts apply. (1) The equipment falls in the MACRS 3 -year class. (2) Estimated maintenance expenses are $50,000 per year. (3) The firm's tax rate is 34%. (4) If the...
can you please show your work? Healthcare Finance 18.2 Net reven Cash expe Depreciati Earni Interest...
can you please show your work?
Healthcare Finance 18.2 Net reven Cash expe Depreciati Earni Interest Earni Taxes (40 Net profit Asset requ c. Is the financial risk of the business different under the two acquisi tion alternatives? Big Sky Hospital plans to obtain a new MRI that costs $1.5 million and has an estimated four-year useful life. It can obtain a bank loan for the entire amount and buy the MRI, or it can lease the equip ment. Assume...
Lease versus Buy Big Sky Mining Company must install $1.5 million of new machinery in its Nevada mine. It can obtain a bank loan for 100% of the purchase price, or it can lease the machinery. Assume that the following facts apply: 1. The machinery falls into the MACRS 3-year class. (The depreciation rates for Year 1 through Year 4 are equal to 0.3333, 0.4445, 0.1481, and 0.0741.) 2. Under either the lease or the purchase, Big Sky must pay...
Lease versus Buy Big Sky Mining Company must install $1.5 million of new machinery in its Nevada mine. It can obtain a bank loan for 100% of the purchase price, or it can lease the machinery. Assume that the following facts apply: 1. The machinery falls into the MACRS 3-year class. (The depreciation rates for Year 1 through Year 4 are equal to 0.3333, 0.4445, 0.1481, and 0.0741.) 2. Under either the lease or the purchase, Big Sky must pay...
Lease versus Buy Big Sky Mining Company must install $1.5 million of new machinery in its Nevada mine. It can obtain a bank loan for 100% of the purchase price, or it can lease the machinery. Assume that the following facts apply: 1. The machinery falls into the MACRS 3-year class. (The depreciation rates for Year 1 through Year 4 are equal to 0.3333, 0.4445, 0.1481, and 0.0741.) 2. Under either the lease or the purchase, Big Sky must pay...
Sullivan-Swift Mining Company must install $1.4 million of new machinery in its Nevada mine. It can obtain a bank loan for 100% of the required amount. Alternatively, a Nevada investment banking firm that represents a group of investors believes that it can arrange for a lease financing plan. Assume that the following facts apply: 1. The equipment falls in the MACRS 3-year class. The applicable MACRS rates are 33%, 45%, 15%, and 7%. 2. Estimated maintenance expenses are $65,000 per...
can you please show your work?
Healthcare Finance 18.2 Net reven Cash expe Depreciati Earni Interest Earni Taxes (40 Net profit Asset requ c. Is the financial risk of the business different under the two acquisi tion alternatives? Big Sky Hospital plans to obtain a new MRI that costs $1.5 million and has an estimated four-year useful life. It can obtain a bank loan for the entire amount and buy the MRI, or it can lease the equip ment. Assume...
Most questions answered within 3 hours.
-
A galaxy is a large grouping of stars. Approximately how many
stars are in the Milky...
asked 43 minutes ago -
The Pen, Evan, and Torves Partnership has asked you to assist in
winding-up its business affairs....
asked 46 minutes ago -
A) Asha Company completed its inventory count. It arrived at a
total inventory value of
$200,000....
asked 1 hour ago -
When you move a rope up and down, waves are created. If the
waves pass through...
asked 2 hours ago -
QUESTION 52
Which of the following is a direct result of scarcity?
A college student misses...
asked 2 hours ago -
The zero order reaction 2N2O→2N2+O2 has the rate constant k of
7.20×10−3 molL s. If the...
asked 2 hours ago -
When you borrow money to buy a house, a car, or for some other
purpose, you...
asked 2 hours ago -
Write a c program that finds the uncommon elements from two
array elements using pointers
only...
asked 2 hours ago -
SQL help:
Design a database diagram for a database that stores information
about the Downloads that...
asked 3 hours ago -
In 1970s and 1980s, molecular biologists discovered that the
hormone testosterone, binds a receptor protein that...
asked 5 hours ago -
january 1 2010 road catering service purchase a piece of
equipment for 58000 which is expected...
asked 6 hours ago -
Explain Mertons concept of anomie is and what the
modes of adaptation to it are?
asked 7 hours ago