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
At the beginning of 2010, Mirror Corporation, had undepreciated capital cost (UCC) of $1,575,000 in asset Class 38 with a CCA rate of 30%. On April 15, 2010, Mirror sold an asset t

Example of Economic Order Quantity The EOQ model supposes : - Annual demand is recognized - Hold costs are constant and recognized - Ordering costs are recognized a

HOW APPLICABLE IS THE MARGINAL COSTING CONCEPT IN ACCOUNTING

Frame-it Ltd is a manufacturer of metal picture frames. The firm's two product lines are designate S (small frames: 12 x18 cm) and L (large frames: 20 x 25 cm). The primary raw mat

Controllable and Non Controllable Costs Controllable costs can be influenced on the level of authority at that they are being analyzed when non-controllable costs cannot.

Current assets 180.00   232.00 Less: Current Liabilities 80.00   105.00 Working Capital

Example of Profit Volume Graph The summary results of a company are given as: Product                        A B          C

Example B & B Mechanical Repairs is a small, family owned partnership that specialises in the servicing and repair of motor vehicles. The business employs three qualified mecha

Denair Fine Wines, Inc., is planning to bring out a higher-quality wine product than any currently available in Stanislaus county. They've decided on selling the blended, fortified