Jane is asked to evaluate whether it would be better to lease an asset or to borrow money from the bank to buy the asset. The NPV from buying the asset is calculated to be $30,000. The NPV for the lease versus borrow to buy analysis is calculated to be $500. Which of the following statements best describe the lease versus buy decision for this investment? None of the other statements is correct. More than one of the other statements is correct. As the asset has positive NPV, Jane indifferent between leasing the asset or borrowing to buy it. O Jane should lease the asset because her company would be better off by $30,000 compared to borrowing to buy the asset. Jane should lease the asset as long as the NPV for the lease versus borrow to buy analysis is positive.

Jane is asked to evaluate whether it would be better to lease an asset or to borrow money from the bank to buy the asset. The NPV from buying the asset is calculated to be $30,000. The NPV for the lease versus borrow to buy analysis is calculated to be $500. Which of the following statements best describe the lease versus buy decision for this investment? None of the other statements is correct. More than one of the other statements is correct. As the asset has positive NPV, Jane indifferent between leasing the asset or borrowing to buy it. O Jane should lease the asset because her company would be better off by $30,000 compared to borrowing to buy the asset. Jane should lease the asset as long as the NPV for the lease versus borrow to buy analysis is positive.

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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Lease versus Buy Big Sky Mining Company must install $1.5 million of new machinery in its Nevada mine. It can obtain a bank loan for 100% of the purchase price, or it can lease the machinery. Assume that the following facts apply: The machinery falls into the MACRS 3-year class. (The depreciation rates for Year 1 through Year 4 are equal to 0.3333, 0.4445, 0.1481, and 0.0741.) Under either the lease or the purchase, Big Sky must pay for insurance, property taxes, and maintenance. The firm's tax rate is 25%. The loan would have an interest rate of 10%. It would be nonamortizing, with only interest paid at the end of each year for four years and the principal repaid at Year 4. i. The lease terms call for $400,000 payments at the end of each of the next 4 years. Big Sky Mining has no use for the machine beyond the expiration of the lease, and the machine has an estimated residual value of $200,000 at the end of the 4th year.
Delamont Transport Company (DTC) is evaluating the merits of leasing versus purchasing a truck with a 4- year life that costs $40,000 and falls into the MACRS 3 - year class. If the firm borrows and buys the truck, the loan rate would be 10%, and the loan would be amortized over the truck's 4-year life, so the interest expense for taxes would decline over time. The loan payments would be made at the end of each year. The truck will be used for 4 years, at the end of which time it will be sold at an estimated residual value of $10,000. If DTC buys the truck, it would purchase a maintenance contract that costs $1,000 per year, payable at the end of each year. The lease terms, which include maintenance, call for a $10,000 lease payment (4 payments total) at the beginning of each year. DTC's tax rate is 40%. What is the net advantage to leasing? ( Note: Assume MACRS rates for Years 1 to 4 are 0.3333, 0.4445, 0.15, and 0.07.). $849 • $896 • $945. $999 •$1,047
1. what amount should be used as the initial cash flow for this project and why?? 2. What is the after-tax salvage value for the spectrometer? 3. What is the MPV of the project? Should the firm accept or reject this project?
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.
You are an employee of University Consultants, Limited, and have been given the following assignment. You are to present an investment analysis of a small retail income-producing property for sale to a potential investor. The asking price for the property is $1,360,000; rents are estimated at $174,080 during the first year and are expected to grow at 2.5 percent per year thereafter. Vacancies and collection losses are expected to be 10 percent of rents. Operating expenses will be 35 percent of effective gross income. A fully amortizing 70 percent loan can be obtained at 6 percent interest for 30 years (total annual payments will be monthly payments × 12). The property is expected to appreciate in value at 3 percent per year and is expected to be owned for five years and then sold. Required: a. What is the first-year debt coverage ratio? b. What is the terminal capitalization rate? c. What is the investor’s expected before-tax internal rate of return on equity invested (BTIRR)? d.…
Compare the cost of the following leasing agreement with the finance charge on a loan for the same time period. The price of the car is $25,000, and its projected residual value at the end of five years is $10,000. Monthly payment $450 Capital cost reduction $1,700 Disposition charge $400 Other things being equal, one would want to finance this car rather than take this lease if the finance cost were less than Group of answer choices $14, 100. $15,500. $12,900. $400.
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.
Sky High Partners is evaluating a high-rise office building to add to its investment portfolio. To calculate a value, Sky High plans to use the income approach, based on the following estimates: Gross potential yearly rental income Estimated vacancy rate Yearly operating costs Market capitalization rate a. Compute the net operating income (NOI) for the building. Net operating income $ Valuation $ 890,000 2.75% $ 417,000 14% 448,525 b. Using the income approach, calculate the value for the office building. Note: Round your answer to the nearest whole number.
The terminal cap rate used for valuation purposes in a DCF is fundamentally different than the discount rate used in that same DCF. The assumed sale of the property takes place at the end of your hold period, generally 10 years later in most models. The property is older and the market and the economy have changed. With that said, what do you believe to be the right approach for terminal cap rate selection in a DCF on a development project and why?
Based on last year’s Statement of Comprehensive Income, the company’s marginal tax rate was 35%. Before making the decision to buy or lease, Richard would like to carefully weigh the pros and cons of leasing versus borrowing and buying. However, the decision must be made soon, as the old refrigeration units are “on their last legs”! What factors, aside from the NAL, must Richard consider before making the lease versus buy decision? 2) Should Richard lease or buy the refrigeration units?
What is the net present value of the investment in the car wash?
1. What are three significant differences between income property finance and owner occupied single family residential finance 2. You are considering a loan or investment in an income property. The projected DSCR is too low relative to like properties. What does that potentially tell you? 3. You are considering a loan or investment in an income property. The market Cap Rate is significantly higher than suggested by current NOI on the subject property relative to the asking price. Discuss the implications and potential causes,

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