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
Example of Process Cost Report Let suppose that the beginning work in progress in a Company in the month of November was 1,000 units that were 100 percent complete in terms of

weekly working hour 48 , hourly wage rate 15$ , price rate per unit 6$ , normal time taken per piece 36 minuets , normal output per week 220 pieces , actual output per week 275 pie

Assignment of Variance in Variance Calculation In variances calculating, the calculations require to be detailed sufficient hence the responsibility for the variance can be a

Allie forms Broadbill Corporation by transferring land (basis of $125,000, fair market value of $775,000), which is subject to a mortgage of $375,000. One month prior to incorporat


A 1- year Canadian bond with a face value of 5000 can be purchased at 4800. a) Calculate the nominal interest rate in Canada. b) if the Canadian dollar is expected to depreci

Making Variance Analysis More Meaningful To compose variance analysis as useful aid to management is the main objective of variance calculations.  However this can only be don

The next year's budget for Benny, Inc., is given below: Product 1 & 2 Sales $945,000 & 688500 Variable costs 459,900 & 297,000 Fixed costs 300

ADVANTAGES OF STANDARD COSTING 1.     It offers a yardstick for measurement of performance. 2.     It helps 'Management by Exception'. 3.     It allows the management to

How would I calculate the debt amortization for a bond issued at discount with a maturity of 12 years, market interest rate at issue 10% annually, 5% semi annually, and has a state