Your company decided to offer product delivery service and would need a truck for the delivery. You are evaluating the following two options. Option 1: Your company can lease a truck at a pretax cost of $27,000 per year. Option 2: Your company can buy a truck at a cost of $84,000, with annual pretax maintenance expenses of $14,000. The truck will depreciate to zero on a straight-line basis. The truck has a 4 years life and will have a salvage value of $18,000 at the end of its life. If the tax rate is 35% and the discount rate is 10%, which option would you prefer? (Hint: compute the equivalent annual cost (EAC).)

Two plans are available for a company to obtain automobiles for its salesmen. How many miles must the cars be driven each year for the two plans to have the same costs? Use an interest rate of 10%. Plan A: Lease the cars and pay PO.35 per mile. Plan B: Purchase the cars for P11,201 and economic life of three years after which it can be sold for P1,912. Gas and oil cost P0.06 per mile. Insurance is P500 per year.

Your company is deciding whether to purchase a durable delivery vehicle or a short-term vehicle. The durable vehicle costs $25 000 and should last five years. The short-term vehicle costs $10 000 and should last two years. If the cost of capital for the company is 15 per cent, then what is the equivalent annual cost for the best choice for the company? (Round to the nearest dollar.) $6151, short-term vehicle  $5000, either vehicle $7458, long-term vehicle $5000, short-term vehicle

A company is currently paying a sales representative $0.50 per mile to drive her car for company business. The company is considering supplying the representative with a car, which would involve the following:Option l: Continue to pay at the rate of 50 cents per mile.Option 2: Provide a company vehicle to the sales representative. A car costs$24,000 and has a service life of five years and a market value of $7,000 atthe end of that time. The cost of keeping the car in the garage during the off-hours amounts to $2,500 a year, and the cost of fuel, tires, and maintenance is 30 cents per mile. The car will be depreciated by MACRS using a recovery period of five years (20%, 32%, 19.20%, 11.52%, 11.52%).The firm's marginal tax rate is 40%. What annual mileage must the sales representative travel by car for the cost of the two options of providing transportation to be equal if the interest rate is 15%?(a) 36,345 miles (b) 41,235 miles (c) 45,233 miles (d) 47,518 miles

A firm is considering leasing or buying a mower. The mower costs $1000 and can be depreciated and falls into the MACRS 3 year class (33%; 45%; 15% and 7%). A maintenance contract will be purchased for $200 per year payable at the start of each year for 4 years. The firms tax rate is 30%. The firm expects to sell the mower for $96 at the end of the 3rd year. What is the net sale price when the mower is sold?

Some equipment is needed for a construction project. It can be leased for $150,000 annually, or it can be purchased for $900,000 at the beginning and sold for $225,000 at the end of 3 years. What is the rate of return for owning the equipment rather than leasing it?

You are considering the purchase of one of two machines used in your manufacturing plant. Machine A has a life of two years, costs $95 initially, and then $140 per year in maintenance costs. Machine B costs $165 initially, has a life of three years, and requires $115 in annual maintenance costs. Either machine must be replaced at the end of its life with an equivalent machine. The discount rate is 12 percent and the tax rate is zero. Calculate the EAC. (Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places.) Machine A Machine B EAC

Your landscaping company can lease a truck for $7,200 a year (paid at year-end) for 6 years. It can instead buy the truck for $35,000. The truck will be valueless after 6 years. The interest rate your company can earn on its funds is 7%.   a. What is the present value of the cost of leasing? (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. Is it cheaper to buy or lease? c. What is the present value of the cost of leasing if the lease payments are an annuity due, so the first payment comes immediately? (Do not round intermediate calculations. Round your answer to 2 decimal places.) d. Is it now cheaper to buy or lease?

A company is considering several mutually exclusive ways that can meet a requirement for a filling machine for its creamer line. One choice is to buy a machine. This would cost $75 000 and last for six years with a salvage value of $12 000. Alternatively, it could contract with a packaging supplier to get a machine free. In this case, the extra costs for packaging supplies would amount to $17 500 per year over the six-year life (after which the supplier gets the machine back with no salvage value for the company). The third alternative is to buy a used machine for $40 000 with zero salvage value after six years. The used machine has extra maintenance costs of $3500 in the first year, increasing by $2500 per year. In all cases, there are installation costs of $8000 and revenues of $25 000 per year. a) Using the IRR method, determine which is the best alternative. The MARR is 10 percent.

Your landscaping company can lease a truck for $8,400 a year (paid at year-end) for 7 years. It can instead buy the truck for $44,000. The truck will be valueless after 7 years. The interest rate your company can earn on its funds is 8%.   a. What is the present value of the cost of leasing? (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. Is it cheaper to buy or lease? c. What is the present value of the cost of leasing if the lease payments are an annuity due, so the first payment comes immediately? (Do not round intermediate calculations. Round your answer to 2 decimal places.) d. Is it now cheaper to buy or lease? Your landscaping company can lease a truck for $8,400 a year (paid at year-end) for 7 years. It can instead buy the truck for $44,000. The truck will be valueless after 7 years. The interest rate your company can earn on its funds is 8%.   a. What is the present value of the cost of leasing? (Do not round intermediate calculations. Round…