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
You have the following information about rates in London for Eurocurrency loans of one-year duration, the exchange rate between the USD and euros, the currency in which you want fi

The economy of Cotai contains 2000 $1 bills. (a) If people hold all money as currency, what is the quantity of money? (b) If people hold all money as demand deposits and bank

Q. What do you mean by earnings per share? Anti-dilution - Condition which may increase computation of EARNINGS PER SHARE (EPS)or decrease loss per share solely due to the incl

Wright Corporation began its operations on September 1 of the current year. Budgeted sales for the first three months of business are $243,339, $313,087, and $415,174, respectively

Joe Shareholder owns 100 shares of Peach Company stock which is currently selling for $100 per share. Peach declares a 2-1 stock split. How much are Joe's shares worth after the st

After all events have been recorded, Lang's obligations to creditors represents what percent of total assets? a).record the events under an accounting equation b. After all e

Q. What is primary financial purpose? The primary financial purpose of a company is typically stated to be the maximisation of shareholder wealth and Sassone plc has declared p

Income Statement 2013 2012 2011 Vertical Anaylsis Vertical Anayl Horizontal Net revenue 5,075,390 4,763,180 4,158,507 year 1 year 2 Anaylsis Cost of goods 1,377,242 1,297,102 1,134

Value of accounting information When assessing value of accounting information we are confronted with similar problems. Provision of accounting information can be very expensiv

Q. Define about SME FINANCE? SMEs contribute in a significant way to many economies in the world. Moreover generating income, in often large proportions in relation to GNP acro