Calculating cost of purchasing & prepare income, Finance Basics

The Jacobs company needs to acquire a new lift truck for transporting its final product to the warehouse.

One alternative is to purchase the truck for $45,000. Maintenance of the truck will be an annual cost of $1,200.  The truck falls into the 5-year MACRS classification and it has a salvage value of $10,000, which is the expected market value after 4 years, at which time Jacob plans to replace the truck, irrespective of whether it is purchased or leased.

Alternatively, Jacob could lease the truck under a four-year contract for a lease payment of $15,000 per year.  Each annual lease payment must be made at the beginning of the year.  This is an operating lease, so the truck would be maintained by the lessor (the leasing company).  

The Jacobs company has a marginal tax rate of 40% and a MARR of 15%.

a,  Prepare an Income for the "Buy" cost-only option.  
b.  Prepare Cash flow statement for the "Buy" option.  
c.  What is the present worth of the cost of purchasing the truck?

 

Posted Date: 2/14/2013 6:35:37 AM | Location : United States







Related Discussions:- Calculating cost of purchasing & prepare income, Assignment Help, Ask Question on Calculating cost of purchasing & prepare income, Get Answer, Expert's Help, Calculating cost of purchasing & prepare income Discussions

Write discussion on Calculating cost of purchasing & prepare income
Your posts are moderated
Related Questions
Klose Outfitters Inc. believes that its optimal capital structure having of 60% common equity and 40% debt, and its tax rate is 40%. Klose have raise additional capital to fund its

Significant Features of Partnership 1) The capital is contributed by the partners and no appeal is made to the public. 2) Like the sole proprietorship, a partnership has a l

From the following information related to XYZ Ltd.; you are required to find out (a) contribution (b) Break-even point in units (c) Margin of safety, (d) Profit             Tota

Type of Partnerships There are two main kinds of partnerships. Namely: Ordinary Partnership - An ordinary partnership is one in which all members have unlimited liability.

The director of capital budgeting for a firm has identified two mutually exclusive projects, A and B, with the following expected net cash flows: Expected Net Cash Flows Year

Question: (a) (i) Define the term multicollinearity. (ii) Explain why it is important to guard against multicollinearity. (b) (i) Sometimes we encounter missing value

Imagine Joy is the project coordinator in a company where four projects are running concurrently. He's employed you as the senior business analyst to perform some financial calcula


Profitability Ratio These ratios signify the performance of the firm in relation to its capability to derive returns or profit from investment or from sale of goods that is pr