Reference no: EM131446961
Assignment
Lewis Health System Inc. has decided to acquire a new electronic health record system for its Richmond hospital. The system receives clinical data and other patient information from nursing units and other patient care areas, then either displays the information on a screen or stores it for later retrieval by physicians. The system also permits patients to call up their health record on Lewis's website.
The equipment costs $1,000,000, and, if it were purchased, Lewis could obtain a term loan for the full purchase price at a 10 percent interest rate. Although the equipment has a six-year useful life, it is classified as a special-purpose computer, so it falls into the MACRS three-year class. If the system were purchased, a four-year maintenance contract could be obtained at a cost of $20,000 per year, payable at the beginning of each year. The equipment would be sold after four years, and the best estimate of its residual value at that time is $200,000. However, since real-time display system technology is changing rapidly, the actual residual value is uncertain.
As an alternative to the borrow-and-buy plan, the equipment manufacturer informed Lewis that Consolidated Leasing would be willing to write a four-year guideline lease on the equipment, including maintenance, for payments of $260,000 at the beginning of each year. Lewis's marginal federal-plus-state tax rate is 40 percent. You have been asked to analyze the lease-versus-purchase decision, and in the process to answer the following questions:
a. What is the present value cost of owning the equipment?
b. What is the present value cost of leasing the equipment?
c. What is the net advantage to leasing (NAL)?
d. Answer these questions one at a time to see the effect of the change on NAL. That is, starting with the original numbers you used for questions a. and b., what is the NAL if:
- interest rate increases to 12 percent
- the tax rate falls to 34 percent
- maintenance cost increases to $25,000 per year
- residual value falls to $150,000
- the system price increases to $1,050,000
e. Do the changes in d. make leasing more or less attractive? Explain.
|
What business opportunity might project completion create
: What information should be included in the following elements of the project charter: What is the problem the project proposes to address? What business opportunity might project completion create
|
|
Two savings accounts offered by different banks
: You are looking at two savings accounts offered by different banks. One pays 5.25% APR, with daily compounding. The other pays 5.3% APR with semiannual compounding. Which account should you use to get more from your deposit?
|
|
Define the characteristics of a group
: Define the characteristics of a group and identify how these align to group behaviours and performance within the Virgin group of companies. Explain the strengths and weaknesses of these in terms of team member behaviours such as cohesiveness, con..
|
|
Can you devise a protocol where proof size
: Can you devise a protocol where proof size, verification time, and digest size are all sublinear? You might need a sub-protocol that involves some amount of two-way communication for the user to be able to update her digest when she executes and a..
|
|
What is the present value cost of owning the equipment
: What is the present value cost of owning the equipment? What is the present value cost of leasing the equipment? What is the net advantage to leasing (NAL)?
|
|
Describe the core marketing functions within an organization
: Describe the core marketing functions within an organization. Discuss the goals and expected outcomes of this organizational function
|
|
Same interest is annual compounding instead
: Suppose you just deposited $50 today into Bank of America savings account that has an APR of 6%. Based on simple interest annually, how much will you have in the account after 35 years assuming no withdraw? What would be your answer if the same inter..
|
|
What are the essential tenets of the scientific method
: What are the essential tenets of the scientific method, and why is the scientific method important to business research? How have you incorporated the scientific method into your own research projects in the past
|
|
Create a screen saver application
: Create a graphical application that draws 100 random lines in a canvas, each in a random color and Extend your application so that it repaints itself every five seconds.
|