Lease or buy, Financial Accounting

La Favorite Pastry Shop has been in business since 1985 and started with a large commercial
oven that was built in 1955. Max, the owner is debating whether or not to purchase a new oven at
a cost of $125,000 with bank financing at 7%, or he can choose to lease the oven over a 15 year
period with annual lease payments of $13,000 with the first payment due on inception of the
lease. In either case, Max expects the new oven to have a useful life of 15 years. The company’s
marginal tax rate is 23%, the asset is a class 30 asset with a CCA rate of 30%.
Max has asked you, a good friend and a CMA to help assess the alternatives.
Determine whether or not the machine should be purchased or leased. You must recommend a
clear alternative and support your recommendation quantitatively and qualitatively by including
advantages/disadvantages of each.
Posted Date: 9/14/2012 5:06:26 PM | Location : United States







Related Discussions:- Lease or buy, Assignment Help, Ask Question on Lease or buy, Get Answer, Expert's Help, Lease or buy Discussions

Write discussion on Lease or buy
Your posts are moderated
Related Questions
We have discussed the computation of the future value in the previous sections; here let us work the process in opposite. Let us assume you have won a lottery ticket worth Rs. 1000

Bakers Bagels LLC produces and sells 20 types of bagels by the dozen. Bagels are priced at $6.00 per dozen (or $0.50 each) and cost $.020 per unit to produce. The company is consid

Bell Mountain Vineyards is considering updating its current manual accounting system with a high-end electronic system. While the new accounting system would save the company mon

Notice an Rs.50, 000 investment in a one year fixed deposit and rolled over yearly for the subsequently two years.  The interest rate for the primary year is 5 percent  yearly and

Assets   1) The classification of investments in the Balance Sheet will be under a few broad headings with schedules listing the individual assets. Where the Trustees Act has been

RSC Designs quarterly selling and distribution expenses are $100,000 including ($10,000 depreciation), and are expected to be paid in the quarter incurred. Quarterly administrat

The intestate leaves one surviving spouse and children The surviving spouse is entitled to: a. The personal and household effects of the deceased absolutely; b. A life inte

If I bought a 10 year bond five years ago for 936.05. The bons make semiannual coupon payments at a rate of 8.4%. If the current price of the bonds is 1,048.77, what is the yield e

Basics of Sundry Matters Current accounts balances must always be equal and opposite. The head office current account in the branch books should always have a credit bal

what managers should know about internal rate of return (IRR) and why?