Calculate the cash flows for each alternative, 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: 3/13/2013 3:05:43 AM | Location : United States







Related Discussions:- Calculate the cash flows for each alternative, Assignment Help, Ask Question on Calculate the cash flows for each alternative, Get Answer, Expert's Help, Calculate the cash flows for each alternative Discussions

Write discussion on Calculate the cash flows for each alternative
Your posts are moderated
Related Questions
High-Low method of cost estimation and Number of Photocopies as the cost driver, what would be the resulting cost equation for Maintenance Costs?

Early customers at Graffiti Week balk at the price for Moondoggie Reserve. The marketing department at DFW, Jolene, conducts some research that suggests Stanislaus county residents

What depreciation method does Amazon use for property and equipment? What is the range of useful lives for buildings and for fixtures and equipment? Do these useful lives make sens


raw an organization chart of any actual or hypothetical manufacturing organization to show the position of management/cost accounting department within an organization and discuss

We consider two regions A and B. Each market has the same size (i.e. number of consumers) but differs in the willingness to pay for one unit of the good proposed by the firm. On ma

is sale of salvage from capital project recorded as gain/loss or applied back to project costs

Tracking Direct Materials Jack keeps full records of the material released to each job. When Donnie gathered up light bulbs, tape, breakers, wire, and wire nuts on the morning

The Butchering Department of the Santa Fe Meat Packing Corporation (a process costing corporation, FIFO costing) had 1,500 units, 1/3 completed at the beginning of the period and 1

In an application of a hand-held clinical thermometer for the National Health Service it is required to use disposable temperature sensors and digital read out of temperature betwe