Calculate the cash flow - capital cost, Cost Accounting

A company is evaluating the following lease or buy option. 

A four year lease with annual payments of $25,000 payable at the beginning of the year. The tax shield is available at the end of the year.  The company's tax rate is 25% and company's cost of capital is 12%. 

The machine costs $85,000 has a four year useful life with no residual value.  If financed the asset would be financed through a term loan at 10%.  The loan calls for equal payments to be made at the end of each year for four years. The machine would qualify for accelerated capital cost allowance written off on a straight line basis over two years.


Calculate the cash flows for each alternative.  Which alternative is the most attractive?

Posted Date: 3/8/2013 4:06:55 AM | Location : United States

Related Discussions:- Calculate the cash flow - capital cost, Assignment Help, Ask Question on Calculate the cash flow - capital cost, Get Answer, Expert's Help, Calculate the cash flow - capital cost Discussions

Write discussion on Calculate the cash flow - capital cost
Your posts are moderated
Related Questions
The beginning inventory balances of Item X on August 1 and the purchases of the item during the month of August were as follows: August 1 Beginning Inventory 600 units @ $10.00

The use of standard costs can present a number of potential problems or disadvantages. Most of these problems result from improper use of standard costs and the management by excep

OBJECTIVES OF COST ACCOUNTING 1)To help in the development of long range plans by provided that cost data that acts as a origin for projecting data for planning. 2)To make s

Labour Variances From our basic data, we can calculate the labour variances as given as: i. Labour Rate Variance = (AH x AR) - (AH  x SR)

Q. What was the amount of cash a firm collected from its customers, given the following fact set? The firm's balance sheets at the beginning and end of the year show gross accou

Period Costs Some terms are difficult to define. In one school of thought, period costs are the any costs that are not product costs. But, such a description is a stretch, beca

Goal Congruence - Behavioural Aspects of Standards A perfect variance analysis and standard costing system must enhance goal congruence between as: i. The goal of individua

Bebe, a manufacturer of sophisticated and fashionable women's clothing, is completing a new assembly plant in Malaysia.  A final construction payment of 6,000,000 MY

Andrew Industries is contemplating issuing a 30-year bond with a coupon rate of 7% (annual coupon payments) and a face value of $1000. Andrew believes it can get a rating of A from

Your organization (City Rehab) has been approached by an MCO looking for an exclusive arrangement for the rehabilitation of its hip replacement patients. The MCO is aggressively po