Cost of capital, which should be their choice. Note: Will

Cost of capital

Assignment Help Managerial Accounting

Reference no: EM13929422

X company has be approached by the leasing company. They has offered the following terms on a 21,500 equipment.

Year 1 2 3 4 5 6 7

payment 4000 4000 3600 3600 3600 3600 3600

The operating saving from using this equipment will be 12,000 per year. IF X company buys the equipment it will be able to write it off to a residual of 500 over a 7 year period.Tax rate is 30%. Show costs and earnings in a form which would be used if X were to use discounted cash flow method of analyzing the lease vs purchase decisions. which should be their choice. Note: Will the differential investment yield a higher rate of return than the firm's cost of capital? If it is higher, purchase; if not, lease it.

Reference no: EM13929422

Questions Cloud

Variances for fixed moh : When getting variances for fixed MOH, do we have to treat it as if its variable MOH?

Total market value of the bonds : What is the total market value of the bonds? Please show working out.

Balances in selected accounts : At December 31, 2014, before adjusting entries, the balances in selected accounts were: Accounts Receivable $318,400 debit, and Allowance for Doubtful Accounts $4,040 credit. Assume that 11% of accounts receivable will prove to be uncollectible. Prep..

Balance in accounts receivable was : Before this entry was made, the balance in accounts receivable was $100,000 and the balance in the allowance account was $9,000. The net realizable value of accounts receivable before and after the write-off entry was

Cost of capital : which should be their choice. Note: Will the differential investment yield a higher rate of return than the firm's cost of capital? If it is higher, purchase; if not, lease it.

An illustration bonds payable from their carrying value. : An Illustration Bonds payable from their carrying value.

Balance sheet asset titles and account balances : Balance sheet asset titles and account balances (not including accumulated depreciation) relative the above transaction on

Reason for resistance to major changes in job content : 33.which is least likely to be the reason for resistance to major changes in job content and procedures by people who have been doing the job with moderate success for many years

Retail inventory method to estimate its monthly inventories : Dixon Books uses the retail inventory method to estimate its monthly ending inventories. The following information is available for two of its departments at October 31, 2015.

User Account

All Pages

Cost of capital

Reference no: EM13929422

Reference no: EM13929422

Questions Cloud

Reviews

Write a Review

Managerial Accounting Questions & Answers

Manage budgets and financial plans

Prepare a retained earnings statement

Prepare a master budget for the three-month period

Construct the companys direct labor budget

Evaluate the predetermined overhead rate

Determine the company''s bid

Compute the pool rates for the different activities

Prepare Company financial statements

Prepare an analysis of terracycles

Discuss the ethical issues

Political resources in emerging markets

Management accounting - ehsan electronics company

Assured A++ Grade

Academics

Major Subjects

Majors

Get In Touch

TERMS & POLICIES

HELP & SUPPORT