Reference no: EM131336222
You have the option to purchase or lease a? five-axis horizontal machining center. Any revenues generated from the operation of the machine will be the same whether it is leased or purchased. Considering the information? given, should you lease or purchase the? machine? Conduct? after-tax analyses of both options. The effective income tax rate is 37?% the evaluation period is five? years, and the MARR is 9?% per year. (Find AW of the leasing option and the AW of the purchasing option)
NOTES: (1) Under the Lease? Option, maintenance costs are included in the annual leasing cost.? (2) Leasing costs are paid at the beginning of each year and are tax deductible.? (3) Depreciation deductions cannot be taken on leased equipment.? (4) Deposits are not tax? deductible, and refunds of deposits are not?taxable; however, owing to the difference in timing between payment and? refund, they must be considered in your analysis.
Leasing Option
Annual leasing? cost: $51,000
Deposit? (paid at EOY? zero, refunded at EOY? five): $73,000
Purchasing Option
Purchase? price: $362,000 capital to be borrowed at i=7?%, equal annual payments (Principal+?Interest) for three years
?Depreciation: three? year, MACRS
Annual maintenance? cost: $22,000
Resale value at EOY? five: $141,000
|
Are these debts dischargeable in bankruptcy
: After graduating from college, Tina works briefly as a salesperson and then files for bankruptcy. As part of her petition, Tina reveals that her only debts are student loans, taxes accruing within the last year, and a claim against her based on her m..
|
|
Observe that the inflation rate
: You observe that the inflation rate in the United States is 2.4 percent per year and that T-bills currently yield 2.9 percent annually. a. What do you estimate the inflation rate to be in Australia, if short-term Australian government securities yiel..
|
|
Write an introduction with a thesis
: Analyze its history from 1877 to the present. Write an introduction with a thesis. Your thesis should summarize the main conclusions that you discovered while researching your topic and that you will support with a logical argument based on evidence..
|
|
Hedge the risk of portfolio by short-selling treasury bonds
: A manager is holding a $1.4 million bond portfolio with a modified duration of 7 years. She would like to hedge the risk of the portfolio by short-selling Treasury bonds. The modified duration of T-bonds is 8 years. How many dollars' worth of T-bonds..
|
|
Depreciation deductions cannot be taken on leased equipment
: You have the option to purchase or lease a? five-axis horizontal machining center. Any revenues generated from the operation of the machine will be the same whether it is leased or purchased. Under the Lease? Option, maintenance costs are included in..
|
|
Dollar gain or loss and hpr
: You bought a stock for $37.80 and sold it 7 months later for $40.18 with no dividends paid. What is your (a) Dollar gain or loss; and (b) HPR? You bought a stock for $37.80 and sold it 7 months later for $40.18 with no dividends paid. What is your (a..
|
|
Simple annual return and compounded annual return
: You purchased a share of stock for $87.45 twelve years ago and just sold it today for $115.83. No dividends were paid out over the twelve years but you did receive an accumulated dividend of $35.70 when you sold the stock. What is your (a) Simple Ann..
|
|
Manufactures large variety of products
: What a Beatiful Day Manufacturing manufactures a large variety of products. Unfortunately for the company, its sales dramatically decreased in the last two years. Due to this event, the CFO of the company decided to sell the company's Mercedez Benz a..
|
|
What is the company target debt–equity ratio
: Fama’s Llamas has a WACC of 10.7 percent. The company’s cost of equity is 14 percent, and its pretax cost of debt is 8.5 percent. The tax rate is 35 percent. What is the company’s target debt–equity ratio?
|