A firm wants the use of a machine that costs $115,000. If the firm purchases the equipment, it will depreciate the equipment at the rate of $23,000 a year for four years, at which time the equipment will have a residual value of $23,000. Maintenance will be $3,000 a year. The firm could lease the equipment fo four years for an annual lease payment of $30,854. Currently, the firm is in the 40 percent income tax bracket. a. Determine the firm's cash inflows and outflows from purchasing the equipment and from leasing. Use a minus sign to enter negative values, if ant If the answer is zero, enter "0". Round your answers to the nearest cent. Year Net cash flows under leasing Net cash flows under purchasing $ $ 0 1 2 $ 4 $ b. If the firm uses a 14 percent cost of funds to analyze decisions that involve payments over more than a year, should management lease the equipment or purchase it? Use Appendix B and Appendix D to answer the question. Use a minus sign to enter negative values, if any. Round your answers to the nearest cent. Present value of net cash flows under leasing: $ Present value of net cash flows under purchasing: $ Management should -Select the equipment as the present value of the net cash flows under this option is -Select- c. If the firm uses a 8 percent cost of funds to analyze decisions that involve payments over more than a year, should management lease the equipment or purchase it? Use Appendix B and Appendix D to answer the question. Use a minus sign to enter negative values, if any. Round your answers to the nearest cent. Present value of net cash flows under leasing: $ Present value of net cash flows under purchasing: $ Management should -Select the equipment as the present value of the net cash flows under this option is -Select-.
A firm wants the use of a machine that costs $115,000. If the firm purchases the equipment, it will depreciate the equipment at the rate of $23,000 a year for four years, at which time the equipment will have a residual value of $23,000. Maintenance will be $3,000 a year. The firm could lease the equipment fo four years for an annual lease payment of $30,854. Currently, the firm is in the 40 percent income tax bracket. a. Determine the firm's cash inflows and outflows from purchasing the equipment and from leasing. Use a minus sign to enter negative values, if ant If the answer is zero, enter "0". Round your answers to the nearest cent. Year Net cash flows under leasing Net cash flows under purchasing $ $ 0 1 2 $ 4 $ b. If the firm uses a 14 percent cost of funds to analyze decisions that involve payments over more than a year, should management lease the equipment or purchase it? Use Appendix B and Appendix D to answer the question. Use a minus sign to enter negative values, if any. Round your answers to the nearest cent. Present value of net cash flows under leasing: $ Present value of net cash flows under purchasing: $ Management should -Select the equipment as the present value of the net cash flows under this option is -Select- c. If the firm uses a 8 percent cost of funds to analyze decisions that involve payments over more than a year, should management lease the equipment or purchase it? Use Appendix B and Appendix D to answer the question. Use a minus sign to enter negative values, if any. Round your answers to the nearest cent. Present value of net cash flows under leasing: $ Present value of net cash flows under purchasing: $ Management should -Select the equipment as the present value of the net cash flows under this option is -Select-.
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
Related questions
Question
Note:-
- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism.
- Answer completely.
- You will get up vote for sure.
Transcribed Image Text:A firm wants the use of a machine that costs $115,000. If the firm purchases the equipment, it will depreciate the equipment at the rate of $23,000 a year
for four years, at which time the equipment will have a residual value of $23,000. Maintenance will be $3,000 a year. The firm could lease the equipment for
four years for an annual lease payment of $30,854. Currently, the firm is in the 40 percent income tax bracket.
a. Determine the firm's cash inflows and outflows from purchasing the equipment and from leasing. Use a minus sign to enter negative values, if any.
If the answer is zero, enter "0". Round your answers to the nearest cent.
0
Year
Net cash flows under leasing
Net cash flows under purchasing
1
$
b. If the firm uses a 14 percent cost of funds to analyze decisions that involve payments over more than a year, should management lease the
equipment or purchase it? Use Appendix B and Appendix D to answer the question. Use a minus sign to enter negative values, if any. Round your
answers to the nearest cent.
Present value of net cash flows under leasing: $
Present value of net cash flows under purchasing: $
Management should -Select the equipment as the present value of the net cash flows under this option is -Select-0
c. If the firm uses a 8 percent cost of funds to analyze decisions that involve payments over more than a year, should management lease the
equipment or purchase it? Use Appendix B and Appendix D to answer the question. Use a minus sign to enter negative values, if any. Round your
answers to the nearest cent.
Present value of net cash flows under leasing: $
Present value of net cash flows under purchasing: $
Management should Select the equipment as the present value of the net cash flows under this option is -Select-
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 2 images
Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education