An asset costs $910,000 and will be depreciated in a straight-line manner over its three-year life. It will have no salvage value. The corporate tax rate is 23 percent and theappropriate interest rate is 6 percent.a. What would the lease payment have to be to make both the lessor and lesseeindifferent about the lease? (Do not round intermediate calculations and round youranswer to 2 decimal places, e.g., 32.16.)b. Assume that the lessee pays no taxes and the lessor pays taxes. For what range oflease payments does the lease have a positive NPV for both parties? (Enter youranswers from lowest to highest. Do not round intermediate calculations and roundyour answers to 2 decimal places, e.g., 32.16.)Lease paymentb. Lease payment rangea.to

The regular, monthly payment made by a lessee to a lessor for the use of a specific asset under a…

Answered: An asset costs $910,000 and will be…

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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TransITRI is a transportation company with a recent need of a new construction equipment at a first cost of $78,000 (Equation (1)), zero salvage value, and a cash flow before taxes (CFBT) per year t that follows Equation (2). CFBT = $30,000 – 3,000t (for t = 1, 2, … T) (1) CFBT = - $78,000 (for t =0) (2) Calculate the PW if the economic life of similar machinery is 9 years, while the MARR is 16%
TransITRI is a transportation company with a recent need of a new construction equipment at a first cost of $78,000 (Equation (1)), zero salvage value, and a cash flow before taxes (CFBT) per year t that follows Equation (2). CFBT = $30,000 – 3,000t (for t = 1, 2, … T) (1) CFBT = - $78,000 (for t =0) (2) Calculate the PW if the economic life of similar machinery is 7 years, while the MARR is 16%
d
Ziebart Corp.'s EBITDA last year was $430,000 ( = EBIT + depreciation + amortization), its interest charges were $9,500, it had to repay $26,000 of long-term debt, and it had to make a payment of $17,400 under a long-term lease. The firm had no amortization charges. What was the EBITDA coverage ratio? Select the correct answer. a. 8.95 b. 7.97 c. 8.46 d. 7.48 e. 9.44
TransITRI is a transportation company with a recent need of a new construction equipment at a first cost of $78,000 (Equation (1)), zero salvage value, and a cash flow before taxes (CFBT) per year t that follows Equation (2). CFBT = $30,000 – 3,000t (for t = 1, 2, … T) (1) CFBT = - $78,000 (for t =0) (2) Calculate the PW if the economic life of similar machinery is 8 years, while the MARR is 12%
11) A new robotic welder can be leased for 5 years with annual payments of $300,000 with the first payment occurring at lease inception. The system would cost $1,050,000 to buy and would be depreciated straightline to a zero salvage value. The actual salvage value is zero. The firm can borrow at 8 percent and has a tax rate of 23 percent. What discount rate should be used for valuing the lease? A) 9.84 percent B) 19.72 percent C) 6.16 percent D) 8.00 percent E) 6.32 percent
An asset costs $640,000 and will be depreciated in a straight-line manner over its four-year life. It will have no salvage value. The lessor can borrow at 6 percent and the lessee can borrow at 6 percent. If the lessor is in the 30 percent tax bracket and the lessee falls in 10 percent tax bracket. For what range of lease payments does the lease have a positive NPV for the lessee? Select an answer that is closest to yours. O Lease payment $166,167.55 O Lease payment > $234,483.02
Although the company does not have an option to delay construction, it does have the option to abandon the project 1 year from now if the tax is imposed. If it abandons the project, it will sell the complete property 1 year from now at an expected price of $7 million after taxes. Once the project is abandoned, the company will no longer receive any cash flows. Assuming that all cash flows are discounted at 12%, will the existence of this abandonment option affect the company’s decision to proceed with the project today? Explain.
What is the future worth when leased ?
Please solve the problem

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