What effect would the use of straight line depreciation

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1. Compute the net advantage to leasing.

2. Which alternative should Kinko's accept? What other factors might be considered?

3. If the computer system is owned and Kinko's borrows the needed funds from PNC in the form of a bullet loan carrying a 10 percent interest rate instead of an equal payment loan at 10 percent, what effect would this have on the decision to lease or buy?

4. What effect would the use of straight-line depreciation have on the lease-buy decision? 

5. If, at the end of six years, the computer system is expected to have an actual salvage value of $5,000, what would be the impact on the net advantage of leasing?

Suppose that Kinko's Copy Centers has decided to install personal computers and printers in its Pittsburgh store that will be rented to customers on an hourly basis. Kinko's management has called in consultants from a number of computer suppliers to assist it in designing a system. After considering a number of alternatives, Kinko's decided that an Apple Computer system consisting of eight Macintosh computers and two printers best meets its current and projected future needs. Kinko's evaluated the desirability of the acquisition of the Apple computer system using its normal capital budgeting procedures. It found that the computer system has a large positive expected net present value.

Reference no: EM131122130

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