LS Inc has to acquire new market data and quotation system for its new home office. The system may display the data onscreen or may save it for later retrieval and system also allow customers to make call and can convey current quotes. Cost of the equipment is $ 1,000,000 and if the company wants to purchase the equipment they can borrow a loan at a interest rate of 10%. Useful life of equipment is 6 years and it comes under 3 years MARCS class or it can purchase a contract of 4 years where $20,000 have to be paid at the beginning of each year and it will be sold after 4 years and for consolidated ;leasing it will cost for $260,000 which include maintenance cost. Federal plus state tax is 25%. To discuss: Some other issues in lease analysis

Question

Want to see the full answer?

Answer 1

Question

Chapter 19, Problem 9MC

Summary Introduction

Case Summary:

LS Inc has to acquire new market data and quotation system for its new home office. The system may display the data onscreen or may save it for later retrieval and system also allow customers to make call and can convey current quotes. Cost of the equipment is $ 1,000,000 and if the company wants to purchase the equipment they can borrow a loan at a interest rate of 10%. Useful life of equipment is 6 years and it comes under 3 years MARCS class or it can purchase a contract of 4 years where $20,000 have to be paid at the beginning of each year and it will be sold after 4 years and for consolidated ;leasing it will cost for $260,000 which include maintenance cost. Federal plus state tax is 25%.

To discuss:

Some other issues in lease analysis

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

If the car coast $28,000 and the interest rate is 8% and the term of payment is 6 years. How much would it cost you to pay for the car?

43 -ACC-121-71: CH 04 HW-X Question 7 - CH 04 HW - Exercise X ezto.mheducation.com/ext/map/index.html?_con=con&external_browser=0&launchUrl=https%253A%252F%252Fconnect.mheducation.com%252Fcon vo Support L Lenovo McAfee Dashboard | Piedm... Information System... My Shelf | Brytewav... My Shelf | Bryteway... Exercises & Problems Saved Help Sa Scribners Corporation produces fine papers in three production departments-Pulping, Drying, and Finishing. In the Pulping Department, raw materials such as wood fiber and rag cotton are mechanically and chemically treated to separate their fibers. The result is a thick slurry of fibers. In the Drying Department, the wet fibers transferred from the Pulping Department are laid down on porous webs, pressed to remove excess liquid, and dried in ovens. In the Finishing Department, the dried paper is coated, cut, and spooled onto reels. The company uses the weighted-average method in its process costing system. Data for March for the Drying Department…

With the growing popularity of casual surf print clothing, two recent MBA graduates decided to broaden this casual surf concept to encompass a "surf lifestyle for the home." With limited capital, they decided to focus on surf print table and floor lamps to accent people's homes. They projected unit sales of these lamps to be 7,600 in the first year, with growth of 5 percent each year for the next five years. Production of these lamps will require $41,000 in net working capital to start. The net working capital will be recovered at the end of the project. Total fixed costs are $101,000 per year, variable production costs are $25 per unit, and the units are priced at $52 each. The equipment needed to begin production will cost $181,000. The equipment will be depreciated using the straight-line method over a five-year life and is not expected to have a salvage value. The effective tax rate is 21 percent and the required rate of return is 23 percent. What is the NPV of this project? Note:…