You need a particular piece of equipment for your production process. An equipment-leasing company has offered to lease the equipment to you for $10,100 per year if you sign a guaranteed 5-year lease (thelease is paid at the end of each year). The company would also maintain the equipment for you as part of the lease. Alternatively, you could buy and maintain the equipment yourself. The cash flows from doing soare listed here: (the equipment has an economic life of 5 years). If your discount rate is 6.5%, what should you do?Data table(Click on the following icon in order to copy its contents into a spreadsheet.)Year 0-$40,600Year 1-$2,100Year 2- $2,100Year 3Year 4Year 5- $2,100- $2,100- $2,100PrintDone

Buy Option:Initial purchase: -$40,000Annual maintenance payments:Year 1: -2,100/(1.065¹) =…

Answered: You need a particular piece of…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter19: Lease Financing

Section: Chapter Questions

Problem 1P: Reynolds Construction (RC) needs a piece of equipment that costs 200. RC can either lease the...

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You need a particular piece of equipment for your production process. An equipment-leasing company has offered to lease the equipment to you for $9,500 per year if you sign a guaranteed 5-year lease (the lease is paid at the end of each year). The company would also maintain the equipment for you as part of the lease. Alternatively, you could buy and maintain the equipment yourself. The cash flows from doing so are listed here: (the equipment has an economic life of 5 years). If your discount rate is 6.9%, what should you do? The net present value of the leasing alternative is $ (Round to the nearest dollar.) Data table (Click on the following icon in order to copy its contents into a spreadsheet.) Year 0 - $39,000 Year 1 Year 2 Year 3 - $2,200 - $2,200 - $2,200 Year 4 - $2,200 Year 5 -$2,200 -
You need a particular piece of equipment for your production process. An equipment-leasing company has offered to lease the equipment to you for $10,500 per year if you sign a guaranteed-year5-year lease (the lease is paid at the end of each year). The company would also maintain the equipment for you as part of the lease. Alternatively, you could buy and maintain the equipment yourself. The cash flows from doing so are listed here: (the equipment has an economic life of 5 years). If your discount rate is 6.9%, what should you do?
1. You are planning on leasing a drying oven for your production line. The oven lease terms involve an initial payment of $1000 when the oven is delivered, an annual payment of $2000 for seven years, and a final recovery payment of $1000 when the leasing company takes the oven back at the end of the lease. Your corporate cost of money is 4% and the leasing company is responsible for all maintenance on the oven. What is the equivalent (NPV) value of this cashflow today? 1.a The oven you are leasing (from question 1), is expected to generate a cost savings of $5000 per year over the older oven you are currently using. What is the equivalent NPV value of the cashflow when these savings are included?
Assuming that you would like to buy an equipment for your small business. Using the information below, calculate the Rate of Return and the Pay Back Period for the investment. After presenting your calculations, explain why you think this will (or will not) be a good investment. Here are the numbers: Cost of the investment is $100,000 Estimated depreciable life of investment is 5 years Annual depreciated charge is $15,000 Estimated average profit over depreciable life is $10,000.
Reynolds Construction (RC) needs a piece of equipment that costs 200. RC can either lease the equipment or borrow 200 from a local bank and buy the equipment. Reynoldss balance sheet prior to the acquisition of the equipment is as follows: a. (1) What is RCs current debt ratio? (2) What would be the companys debt ratio if it purchased the equipment? (3) What would be the debt ratio if the equipment were leased and the lease not capitalized? (4) What would be the debt ratio if the equipment were leased and the lease were capitalized? Assume that the present value of the lease payments is equal to the cost of the equipment. b. Would the companys financial risk be different under the leasing and purchasing alternatives?
Spotted Potato is evaluating project A, which would require the purchase of a piece of equipment for $550,000. During year 1, project A is expected to have relevant revenue of $312,000.00, relevant costs of $105,000.00, and some depreciation. Spotted Potato would need to borrow $550,000 for the equipment and would need to make an interest payment of $40,000 to the bank in year 1. Relevant net income for project A in year 1 is expected to be $96000.00 and operating cash flows for project A in year 1 are expected to be $167000.00. Straight-line depreciation would be used. What is the tax rate expected to be in year 1? 29.41% (plus or minus 3 bps) 13.51% (plus or minus 3 bps) 70.59% (plus or minus 3 bps) 34.53% (plus or minus 3 bps) none of the answers are within 3 bps of the correct answer
You have just been offered an opportunity to buy a working daily farm in lowa .The seller shows you financial statements that suggest the investment will provide a cash flow of $80,000 per year .If you assume the farm can operate indefinitely, and you require a 12.8% return on the investment, what is the most you would be willing to pay for the farm.
You have an opportunity to purchase a piece of vacant land for $30,000 cash. If you plan to hold it for 15 years and then sell it at a profit. During this period, you would have to pay annual property taxes of $600 and have no income from the property. Assuming that you would want a 10% rate of return from the investment, a) Draw a cashflow diagram. b) What net price would you have to sell it in the next 15 years?
A property has a FMV of $7,500,000. If the property owner can only secure a loan with an LTV of 70%, a loan amortization of 30 years, and an interest rate of 8.125%, then a) What is the monthly payment for this loan? and b) What is the outstanding balance on the loan after eight years? (Make sure to show how you arrived at your answer by identifying inputs if you used your hand-held calculator).
Give me excel file
IMPORTANT: PLEASE SAVE ALL YOUR HAND CALCULATIONS IN A FILE SO THAT YOU CAN SUBMIT THEM IF REQUIRED BY THE LECTURER. You are considering investing RM62000 in new equipment. You estimate that the net cash flows will be RM11000 during the first year, but will increase by RM2500 per year the next year and each year thereafter. The equipment is estimated to have a 8-year service life and a net salvage value of RM5200 at that time. Assume MARR of 7%. a Calculate the annual capital cost CR (ownership cost) for the equipment. b.Determine the equivalent annual revenue. c.Is this a wise investment? Y/N. Submit Format: 7882 Format: 36630 Format: A
Your venture has signed a new consulting contract that will require you to invest in new analytical software and a new computer. The contract will generate the following periodic cash flows. You have used bank credit to finance the cost of the software and hardware. The financing rate is 6%. Cash flows generated from the project will be reinvested at 4%. The MIRR of the project is between 6% and 7%. time cash flow 0 -$200,000 1 $20,000 2 $30,000 3 $50,000 4 $65,000 5 $80,000 True False

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