11)A new robotic welder can be leased for 5 years with annual payments of $300,000 withthe first payment occurring at lease inception. The system would cost $1,050,000 to buy andwould be depreciated straightline to a zero salvage value. The actual salvage value is zero. Thefirm can borrow at 8 percent and has a tax rate of 23 percent. What discount rate should be usedfor valuing the lease?A) 9.84 percentB) 19.72 percentC) 6.16 percentD) 8.00 percentE) 6.32 percent

Lease is kind of finance arrangement in which heavy equipments can used for payment for annual…

Answered: 11) A new robotic welder can be leased…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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The smiths are not sure whether they should buy or lease equipment. A five year lease could be arranged with annual lease payment of 5000$ payable at beginning of each year. The tax shield from lease payment is available at year end. The company tax rate is 25%. The equipment would cost $25000 and has a five year expected lifespan, and no residual value is expected. if purchased, asset would be financed through a term loan at 12%. The loan calls for equally payment to be made at end of end year for five years. Suppose that the equipment would qualify for CCA on a straight-line basis over five years. Required: 1. Calculate the cash flows for each financing alternate. 2. Which alternative is the most economical.
A Services company is projecting that demand for its services will rise considerably the next three years. They can lease additional equipment for $1,600 at the beginning of every quarter for three years. Alternatively, they can purchase the equipment for $22,995 at 8% compounded quarterly. The salvage value of the equipment after three years is expected to be $4,000. 1. What is the present value of each offer? A. Lease: B. Purchase: 2. Which option would you recommend and how much better is that option in today's dollars?
1 A company considers investing in a $200million in a toll-road project wich they will manage for 30 years (this is called a concession). The road generates income of 10million per year but requires maintenance in years 10, 20 and 30 which costs $2million. Their MARR is 14%. Is this a feasible project?
am. 84.
You work for UTAR that is contemplating leasing printers. Printers’ costs RM 650,000 and would be depreciated straight-line to zero over a decade. You can lease it for RM 100,000 per year for a decade. (a) Assume that the tax rate is 20 percent. You can borrow at 10 percent. Adopt the lease-buy analysis to recommend the best option to UTAR. (b) Malaysia’s government provide a 5% tax reduction during this Covid-19 pandemic. According to the new tax rate, should UTAR remain the option selected in (a)?
Send help please!
Consider a firm A that wishes to acquire an equipment. The equipment is expected to reduce costs by $4200 per year. The equipment costs $25000 and has a useful life of 5 years. If the firm buys the equipment, they will depreciate it straight-line to zero over 5 years and dispose of it for nothing. They can lease it for 5 years with an annual lease payment of $5000. If the after-tax interest rate on secured debt issued by company A is 2% and tax rate is 35%, what is the Net Advantage to Leasing (NAL)?(keep two decimal places)
As an Engineer, you are asked to consider two building proposals, which alternative do you deem superior based on the economics? (Assume the money to be used would be borrowed and paid back within the life of the structure). The nominal interest rate is at 21.4% compounding quarterly. State which method you will use and state why. ALTERNATIVE A ALTERNATIVE B Туре Steel Cement Life 20 years 20 years Initial Cost $1089 $2954 Maintenance $486/year $138/year Cost at the end of 8 $57 $64 years
11. Using the ERR method and a 17% MARR, determine the acceptability of a 10-year manufacturing project that requires an initial investment of P2.8M with additional expenses of P1M and P3M at the end of the third and seventh year, respectively. Annual income from this project is P1.25M for ten years with all equipment to be sold for PO.5M after that time. Apply a 14% reinvestment rate. (Ans. Project is acceptable, 18.1%)
Consider a firm A that wishes to acquire an equipment. The equipment is expected to reduce costs by $5700 per year. The equipment costs $29000 and has a useful life of 7 years. If the firm buys the equipment, they will depreciate it straight-line to zero over 7 years and dispose of it for nothing. They can lease it for 7 years with an annual lease payment of $8000. If the after-tax interest rate on secured debt issued by company A is 7% and tax rate is 25%, what is the Net Advantage to Leasing (NAL)?(keep two decimal places) Answer: -18233.59
13. ABC manufacturing wants to purchase a new machine that is expected to save $12,000 in annual operating and maintenance costs for the next five years. The machine's price is $32,000, and the installation cost is $3500. With a salvage value of $5,000 and an interest rate of 17%, what is the discounted payback period? a. 4 years b. 6 уears с. 5 years d. 3 years
A lease with a term of 4 years calls for annual payments of $3,400. The leased asset would cost $11,300 to buy and would be depreciated straight-line to a zero salvage value over the 4 years. The actual salvage value is negligible. The firm can borrow at a rate of 6 percent. What is the NPV of the lease relative to the purchase if the lessee's tax rate is 21 percent? X -$1,699 $197 -$399 -$194 $23,107

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