Written report with the following content: Appendix1: Leasing Explain the calculations. Your recommendations Objective: Should FFT lease or construct their own production facility Option 1: Construct Costs to incur: Buying land, construct building and getting ready for use (FFT has these funds available in their bank account today so no mortgage is needed) $ 1,200,000 Taxes, insurance, and repairs (per year) $110,000 Intended years of use 15 Projected market value in 15 years $ 1,250,000 Option 2: Lease Intended years of use 15 Deposit required today (this deposit will be returned to FFT when the lease contract is complete is 15 years) $ 100,000 Annual lease payment $ 160,000 Property taxes (annual) to be paid by FFT $ 15,000 Insurance (annual) to be paid by FFT $ 15,000 Required rate of return 8% Methodology: The consulting team is proposing to perform a NPV analysis and determine the benefit to leasing or construction. Based on the analysis, they will recommend the preferred option (construction or leasing Solution in this Item Year(s) Amount of Cash Flows Factor Present Value of Cash Flows

Written report with the following content: Appendix1: Leasing Explain the calculations. Your recommendations Objective: Should FFT lease or construct their own production facility Option 1: Construct Costs to incur: Buying land, construct building and getting ready for use (FFT has these funds available in their bank account today so no mortgage is needed) $ 1,200,000 Taxes, insurance, and repairs (per year) $110,000 Intended years of use 15 Projected market value in 15 years $ 1,250,000 Option 2: Lease Intended years of use 15 Deposit required today (this deposit will be returned to FFT when the lease contract is complete is 15 years) $ 100,000 Annual lease payment $ 160,000 Property taxes (annual) to be paid by FFT $ 15,000 Insurance (annual) to be paid by FFT $ 15,000 Required rate of return 8% Methodology: The consulting team is proposing to perform a NPV analysis and determine the benefit to leasing or construction. Based on the analysis, they will recommend the preferred option (construction or leasing Solution in this Item Year(s) Amount of Cash Flows Factor Present Value of Cash Flows

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Leasing

Leasing is a contractual arrangement in which someone (a lessee) pays the owner (or lessor) of a building, land, vehicle, or other asset for the use of that asset. The lease is the agreement between lessee and lessor.

Question

Written report with the following content: • Appendix1: Leasing Explain the calculations.
Your recommendations
Objective: Should FFT lease or construct their own production facility Option 1: Construct Costs to incur: Buying land, construct building
and getting ready for use (FFT has these funds available in their bank account today so no mortgage is needed) $ 1,200,000 Taxes,
insurance, and repairs (per year) $110,000 Intended years of use 15 Projected market value in 15 years $ 1,250,000 Option 2: Lease
Intended years of use 15 Deposit required today (this deposit will be returned to FFT when the lease contract is complete is 15 years) $
100,000 Annual lease payment $ 160,000 Property taxes (annual) to be paid by FFT $ 15,000 Insurance (annual) to be paid by FFT $
15,000 Required rate of return 8% Methodology: The consulting team is proposing to perform a NPV analysis and determine the
benefit to leasing or construction. Based on the analysis, they will recommend the preferred option (construction or leasing
Solution in this
Item Year(s) Amount of Cash Flows Factor Present Value of Cash Flows

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Net advantage to leasing (NAL) ABC Corp is considering a leasing arrangement to finance some machinery it needs for the next 3 years. The depreciation schedule and salvage value are given below. It can borrow $5,000,000, the purchase price, at 10% and buy the machinery, or it can make 3 equal end-of-year lease payments of $2,100,000 each and lease them. The loan obtained from the bank is a 3-year simple interest loan, with interest paid at the end of the year (the loan will be repaid in full in 3 years). The firm's tax rate is 40%. Annual maintenance costs associated with ownership are estimated at $250,000 (paid at the end of the year), but this cost would be borne by the lessor if it leases. What is the net advantage to leasing (NAL)?
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Assume that a company is choosing between two alternatives-lease a piece of equipment for five years or buy a piece of equipment and sell it in five years. The costs associated with the two alternatives are summarized as follows: Lease Buy $ 60,000 $ 6,000 Purchase cost of equipment Annual operating costs Immediate deposit Annual lease payments Salvage value (5 years from now) $ 8,000 Click here to view Exhibit 7B-1 and Exhibit 7B-2, to determine the appropriate discount factor(s) using the tables provided. If the company chooses the lease option, it will have to pay an immediate deposit of $25,000 to cover any future damages to the equipment. The deposit is refundable at the end of the lease term. The annual lease payments are made at the end of each year. Based on a net present value analysis with a discount rate of 12%, what is the financial advantage (disadvantage) of buying the equipment rather than leasing it? $ 25,000 $ 18,000
Should WLW lease or construct their own production facilityOption 1: ConstructCosts to incur:Buying land, construct building and getting ready for use$ 360,000Taxes, insurance, and repairs (per year)$ 34,000Intended years of use20Projected market value in 20 years$ 1,600,000Maximum down payment WLW can make$ 500,000Remainder in four payments of;$ 160,000Revenue opportunityBuilding annex will be leased to a tenant and will generate a lease revenue (per year) for 10 years$60,000Option 2: LeaseIntended years of use20First lease payment due now$ 90,000Rest of the lease payments (years 2-20)$ 90,000Operating costs to be paid by WLWRepairs (annual)$ 9,000Maintenance (annual)$ 26,000Initial one-time deposit, will be returned in year 20$ 40,000Required rate of return15%Methodology:The consulting team is proposing to perform a NPV analysis and determine the benefit to leasing or construction.Based on the analysis, they will recommend the preferred option (construction or leasing).
Locations under consideration for a border patrol station have their costs estimated by the federal government. Use the B/C ratio method at an interest rate of 8% per year to determine which location to select, if any. Location North N South S Initial Cost. $ 960,000 2,900,000 Annual Cost, $ per Year 480,000 450,000 Disbenefits, $ per Year 70,000 60,000 00 Life, Years 00 The AB/C ratio is Select location (Click to select) v
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Provide neat and easy to understand (preferrably handwritten) complete solution with explanation Will give upvote
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.
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