Your company must obtain some laser measurement devices for the next six years and is considering leasing. You have been directed to perform an actual-dollar after-tax study of the leasing approach. The pertinent information for the study is as follows: Lease costs: First year, $80,000; second year, $60,000; third through sixth years, $50,000 per year. Assume that a six-year contract has been offered by the lessor that fixes these costs over the six-year period. Other costs (not covered under contract): $4,000 in year-zero dollars, and estimated to increase 10% each year. Effective income tax rate: 40%. Solve, a. Develop the actual-dollar ATCF for the leasing alternative. b. If the real MARR (ir) after taxes is 5% per year andthe annual inflation rate (f ) is 9.524% per year, what is the actual-dollar after-tax equivalent annual cost for the leasing alternative?
Your company must obtain some laser measurement devices for the next six years and is considering leasing. You have been directed to perform an actual-dollar after-tax study of the leasing approach. The pertinent information for the study is as follows: Lease costs: First year, $80,000; second year, $60,000; third through sixth years, $50,000 per year. Assume that a six-year contract has been offered by the lessor that fixes these costs over the six-year period. Other costs (not covered under contract): $4,000 in year-zero dollars, and estimated to increase 10% each year. Effective income tax rate: 40%. Solve, a. Develop the actual-dollar ATCF for the leasing alternative. b. If the real MARR (ir) after taxes is 5% per year and
the annual inflation rate (f ) is 9.524% per year, what is the actual-dollar after-tax equivalent annual cost for the leasing alternative?
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