Problem 27-06 MACRS Depreciation and Leasing [LO3]You work for a nuclear research laboratory that is contemplating leasing a diagnosticscanner (leasing is a very common practice with expensive, high-tech equipment). Thescanner costs $5,200,000. Because of radiation contamination, it actually will becompletely valueless in four years. You can lease it for $1,550,000 per year for fouryears. Assume that the tax rate is 24 percent. You can borrow at 8 percent before taxes.Assume that the scanner will be depreciated as three-year property under MACRS. UseTable 10.7.a. What is the NAL of the lease? (A negative answer should be indicated by a minussign. Do not round intermediate calculations and round your answer to 2 decimalplaces, e.g., 32.16.)b. Should you lease or buy?a.b.Answer is complete but not entirely correct.$ -10,374.62 XNALLease

NPV is also known as Net Present Value.. It is a capital budgeting technique which helps in decision…

Answered: Problem 27-06 MACRS Depreciation and…

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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Problem 21-4 Taxes and Leasing Cash Flows You work for a nuclear research laboratory that is contemplating leasing a diagnostic scanner (leasing is a common practice with expensive, high-tech equipment). The scanner costs $6,300,000 and would be depreciated straight-line to zero over six years. Because of radiation contamination, it will actually be completely valueless in six years. You can lease it for $1,260,000 per year for six years. Assume that your company does not contemplate paying taxes for the next several years. You can borrow at 6 percent before taxes. What is the NAL of the lease? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NAL
Problem 21-9 Lease or Buy The Wildcat Oil Company is trying to decide whether to lease or buy a new computer- assisted drilling system for its oil exploration business. Management has decided that it must use the system to stay competitive; it will provide $1.5 million in annual pretax cost savings. The system costs $8.9 million and will be depreciated straight-line to zero over its five-year life, after which it will be worthless. Wildcat's tax rate is 22 percent and the firm can borrow at 7 percent. Lambert Leasing Company has offered to lease the drilling equipment to Wildcat for payments of $1,990,000 per year. Lambert's policy is to require its lessees to make payments at the start of the year. a. What is the NAL for Wildcat? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89.) b. What is the maximum lease payment that would be acceptable to Wildcat? (Do not round intermediate…
Problem 27-06 MACRS Depreciation and Leasing [LO3] You work for a nuclear research laboratory that is contemplating leasing a diagnostic scanner (leasing is a very common practice with expensive, high-tech equipment). The scanner costs $6,300,000. Because of radiation contamination, it actually will be completely valueless in four years. You can lease it for $1,795,000 per year for four years. Assume that the tax rate is 25 percent. You can borrow at 6 percent before taxes. Assume that the scanner will be depreciated as three-year property under MACRS. Use Table 10.7 a. What is the NAL of the lease? (A negative answer should be indicated by a minus. sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. Should you lease or buy? a. b. NAL
Manshuk
Problem 11-27 Scenario Analysis [LO2] Consider a project to supply Detroit with 27,000 tons of machine screws annually for automobile production. You will need an initial $5,300,000 investment in threading equipment to get the project started; the project will last for 6 years. The accounting department estimates that annual fixed costs will be $1,275,000 and that variable costs should be $240 per ton; accounting will depreciate the initial fixed asset investment straight-line to zero over the 6-year project life. It also estimates a salvage value of $650,000 after dismantling costs. The marketing department estimates that the automakers will let the contract at a selling price of $350 per ton. The engineering department estimates you will need an initial net working capital investment of $510,000. You require a return of 14 percent and face a tax rate of 25 percent on this project. a-1. What is the estimated OCF for this project? (Do not round intermediate calculations and round your…
F2 please help
Bhupatbhai
2 10 points & 01:46:23 eBook Hint Bartlett Car Wash Company is considering the purchase of a new facility. It would allow Bartlett to increase its net income by $91,438 per year. Other information about this proposed project follows: Initial investment Useful life Salvage value $ 427,280 8 years $ 52,000 Assume straight line depreciation method is used. Required: 1. Calculate the accounting rate of return for Bartlett. Note: Round your percentage answer to 2 decimal places. 2. Calculate the payback period for Bartlett. Note: Round your answer to 2 decimal places. 1. Accounting Rate of Return Print 2. Payback Period References % years
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Exercise 10-12A (Algo) Determining the payback period LO 10-4 Fanning Airline Company is considering expanding its territory. The company has the opportunity to purchase one of two different used airplanes. The first airplane is expected to cost $14,800,000; It will enable the company to Increase its annual cash Inflow by $3,700,000 per year. The plane is expected to have a useful life of five years and no salvage value. The second plane costs $34,800,000; It will enable the company to increase annual cash flow by $5,800,000 per year. This plane has an eight-year useful life and a zero salvage value. Required *1. Determine the payback period for each Investment alternative. a2. Identify the alternative Fanning should accept if the decision is based on the payback approach. Note: Round your answers to 1 decimal place. a-1. Alternative 1 (First plane) a-1. Alternative 2 (Second plane) a-2. Fanning should accept Payback Period years years
Problem 10-9 Calculating Project OCF [LO1] Esfandairi Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.3 million. The fixed asset will be depreciated straight- line to zero over its three-year tax life, after which time it will be worthless. The project is estimated to generate $1,654,000 in annual sales, with costs of $631,000. If the tax rate is 24 percent, what is the OCF for this project? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.) OCF $ 917,897

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