The wisbley company is contemplating the purchase of a
Course:- Accounting Basics
Reference No.:- EM13601497

Assignment Help
Assignment Help >> Accounting Basics

The Wisbley Company is contemplating the purchase of a helicopter for its executives to use in their business trips. This helicopter could be either purchased or leased from the manufacturer. The useful life of the helicopter is four years. Data concerning these two alternatives follow:

  • Buy Lease
  • Purchase Price 900,000 -
  • Annual Cash Payments for Servicing and Licenses 10,000 -
  • Cash Payments for repairs:
  • End of 2nd year 6,000 -
  • End of 3rd year 8,000 -
  • Salvage Value 270,000 -
  • Annual Rental Payments 250,000

If the helicopter is leased, it would be returned to the manufacturer in four years. Wisbley's required rate of return is 22%.The incremental net present value in favor of leasing rather than purchasing is (rounded off to the nearest hundred dollars):

Put your comment

Ask Question & Get Answers from Experts
Browse some more (Accounting Basics) Materials
Assume that each immigrant who is allowed into the country and has the disease costs the United States $100,000, and each immigrant who enters and does not have the disease
1. Why might the government be interested in influencing exchange rates from time to time? How would it go about moving the exchange rate? 2. Describe the difference between
This question relates to Accounting and it discuss about preparing reconciliation statement with budgeted profit and actual profit and commenting about inter-relationships b
Specific identification is sometimes said to be the ideal method of assigning cost to inventory and to cost of goods sold. Briefly indicate the arguments for and against this
Sawyer Furniture Company concluded its first year of operations in which it made sales of $800,000, all on installment. Collections during the year from down payments and in
On January 1, 2011, a machine was purchased for $900,000 by Floyd Co. The machine is expected to have an 8-year life with no salvage value. It is to be depreciated on a straig
But the three-night requirement does limit the utility of discounted fares for road warriors. What is a "road warrior"? Why would a company put restrictions on a service tha
Potlatch Corporation has issued various types of bonds such as term bonds, income bonds, and debentures. Differentiate between term bonds, mortgage bonds, debenture bonds,