TABLE P8-45 Table for Problem 8-45 Estimate in Year-0 Dollars Best Estimate of Price Change (% per year) Cash Flow Item Purchase Lease Capital investment MV at end of six years Annual operating, insurance, and other expenses Annual maintenance expenses $600,000 90,000 26,000 32,000 2% $26,000 32,000 9
Mortgages
A mortgage is a formal agreement in which a bank or other financial institution lends cash at interest in return for assuming the title to the debtor's property, on the condition that the obligation is paid in full.
Mortgage
The term "mortgage" is a type of loan that a borrower takes to maintain his house or any form of assets and he agrees to return the amount in a particular period of time to the lender usually in a series of regular equally monthly, quarterly, or half-yearly payments.
You have been assigned the task of analyzing whether to purchase or lease some transportation equipment for your company. The analysis period is six years, and the base year is year zero (b = 0). Other pertinent information is given in the shown Table also. Solve,, a. The contract terms for the lease specify a cost of $300,000 in the first year and $200,000 annually in years two through six (the contract, i.e., these rates, does not cover the annual expense items). b. The after-tax MARR (not including inflation) is 13.208 % per year (ir). c. The general inflation rate (f ) is 6%. d. The effective income tax rate (t) is 34%. e. Assume the equipment is in the MACRS (GDS)five-year property class. Which alternative is preferred? (Use an after-tax, actual dollar analysis and the FW criterion.)
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