NCC is a company. The company needs a new machine that can either leased or purchased. If it is purchased, the purchase price is 400,000 dollar. After 5 years, the machine can be sold for 180,000 dollar. the other option is leasing, where the leasing fee is paid once at the end of each year during this five-year period, however, there is no residual value. All payments for repairs, maintenance and others payments for operation are equal for both options. What is the maximum annual leasing fee that can be paid if leasing is to be financially equivalent to the alternative to buy the machine and then sell it for 180,000 dollar at the end of year 5 about the company applies a discount rate of 10% instead of leasing it for five years.
NCC is a company. The company needs a new machine that can either leased or purchased. If it is purchased, the purchase price is 400,000 dollar. After 5 years, the machine can be sold for 180,000 dollar. the other option is leasing, where the leasing fee is paid once at the end of each year during this five-year period, however, there is no residual value. All payments for repairs, maintenance and others payments for operation are equal for both options. What is the maximum annual leasing fee that can be paid if leasing is to be financially equivalent to the alternative to buy the machine and then sell it for 180,000 dollar at the end of year 5 about the company applies a discount rate of 10% instead of leasing it for five years.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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NCC is a company. The company needs a new machine that can either
leased or purchased. If it is purchased, the purchase price is 400,000 dollar. After 5 years, the machine can be sold for 180,000 dollar. the other option is leasing, where the leasing fee is paid once at the end of each year during
this five-year period, however, there is no residual value. All payments for repairs, maintenance and others payments for operation are equal for both options.
- What is the maximum annual leasing fee that can be paid if leasing is to be financially equivalent to the alternative to buy the machine and then sell it for 180,000 dollar at the end of year 5 about the company applies a discount rate of 10% instead of leasing it for five years.
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