A company is deciding whether to lease or buy new equipment that can be purchased for $33,000. If purchased, the equipment will need to be serviced at the end of each year. Consider the following information: • PVCCATS = $10,000 • PV of Lease Payments Before-Tax = $39,000 • PV of Salvage Value = $8,000 • PV of Lease Payments Tax Shield = $18,000 • PV of Annual Service Costs After-tax = $3,000 Based on the above information, what is the present value of buying? (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit any commas and the $ sign in your response. For example, an answer of $1,000.50 should be entered as 1000.50.)
A company is deciding whether to lease or buy new equipment that can be purchased for $33,000. If purchased, the equipment will need to be serviced at the end of each year. Consider the following information: • PVCCATS = $10,000 • PV of Lease Payments Before-Tax = $39,000 • PV of Salvage Value = $8,000 • PV of Lease Payments Tax Shield = $18,000 • PV of Annual Service Costs After-tax = $3,000 Based on the above information, what is the present value of buying? (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit any commas and the $ sign in your response. For example, an answer of $1,000.50 should be entered as 1000.50.)
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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Transcribed Image Text:A company is deciding whether to lease or buy new equipment that can be purchased for $33,000. If purchased, the equipment will need to be serviced at the end of
each year. Consider the following information:
• PVCCATS = $10,000
• PV of Lease Payments Before-Tax = $39,000
PV of Salvage Value = $8,000
PV of Lease Payments Tax Shield = $18,000
%3D
%3D
• PV of Annual Service Costs After-tax = $3,000
Based on the above information, what is the present value of buying? (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit any
commas and the $ sign in your response. For example, an answer of $1,000.50 should be entered as 1000.50.)
Numeric Response
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