What is the after-tax advantage of the purchase option

Assignment Help Financial Accounting
Reference no: EM133128948

Question - Global Sights is an online travel and event booking company. To enhance productivity and reduce operating costs it is planning to update its computer system. The new system would save the company approximately $45,000 per annum in administration costs.

The purchase price of the new system is $68,000. The system will have a life of five years and a resale value of $12,500. Intensive use of the system will require entry into a service contract of $4,550 per annum, payable in advance.

The system will be depreciated at 40% per annum, straight-line method. The firm's tax rate is 30% payable at the end of the year of income. For evaluation purposes the appropriate after tax discount rate is 12%.

The distributor of the system is offering a five year operating lease at $21,500 per year payable in advance covering both the purchase price and ongoing maintenance costs. There is no option to purchase at the end of the lease.

Required - What is the after-tax advantage of the purchase option?

Reference no: EM133128948

Questions Cloud

Calculate the new equilibrium interest rate and quantity : Calculate the new equilibrium interest rate and quantity and explain why the direction of the interest rate shift makes intuitive sense.
Compute total cost of work in process : Metlock Company has the following data: direct labor $226,000, direct materials used $194,400, Compute total cost of work in process
Charge different prices for the parcel and package service : Seven years ago, you started a crosstown delivery service. The service is an environmentally friendly business and, given all the traffic congestion, you are a
Draw a mind map to distinguish between the types of law : Understand the main concepts and principles of consumer & company law to given situations and Understand competition and the right to compete in the UK
What is the after-tax advantage of the purchase option : The purchase price of the new system is $68,000. The system will have a life of five years and a resale value of $12,500. What is the after-tax advantage
About businesses-make product decisions and purchases : People are using their mobile phone browsers more and more every day to find information about businesses, make product decisions and purchases,
Problem statement for query using case study design : Imagine you are serving on the board of a for-profit educational services company. Staff communicate to the board their concerns about the transition from foste
Calculate the internal rate of return : The solar network would cost $7.2 million and is expected to have a 18-year useful life with no residual value. Calculate the internal rate of return
Design for exploring the phenomenon of the study : Having identified and developed a case study problem statement, purpose statement, and research questions regarding the transition to independence of emancipate

Reviews

Write a Review

Financial Accounting Questions & Answers

  Financial statement analysis and preparation

Financial Statement Analysis and Preparation

  Shareholder of a company

Describe the ways that a person can become a shareholder of a company. Why Wal-Mart would split its stock?

  Financial and accounting principles

An understanding of financial and accounting principles can be a valuable tool for managers. While not all managers will find themselves calculating financial ratios or preparing annual financial data.

  Prepare a statement of cash flow using the direct method

Prepare a Statement of Cash Flow using the Direct Method and Prepare the Operations section of the Statement of Cash Flow using the Indirect Method.

  Financial accounting assignment

This assignment has one case study and two question apart from case study. Questions related to document Liquidation question and Company financial statements question - Torquay Limited

  Prepare general journal entries for goela

Prepare general journal entries for Goela Ltd

  Principles of financial accounting

Prepare the journal entry to record the acquisition of the assets.

  Prepare general journal entries to record the transactions

Prepare general journal entries to record the transactions, assuming use of the periodic inventory system

  Global reporting initiative

Compare the view espoused by the economist Milton Friedman about the social responsibilities of business with the views express by Stigler.

  Explain the iasb conceptual frameworks

Explain the IASB Conceptual Framework's perspective of users and their decisions.

  Determine the company''s financial statements

T he focus of the report is to determine the extent to which you are comfortable relying on the financial statements as presented by management .

  Computation of free cash flow

Computation of Free Cash Flow

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd