A company could sell a building for $250,000 or lease it for $2,500 per month. Without making computations,what would need to be considered in determining which of the two is preferred?
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A company could sell a building for $250,000 or lease it for $2,500 per month. Without making computations,what would need to be considered in determining which of the two is preferred?
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- The Capitalpoor Company is considering purchasing a business machine for $100,000. An alternative is to rent it for $35,000 at the beginning of each year. The rental would include all repairs and service. If the machine is purchased, a comparable repair and service contract can be obtained for $1,000 per year. The salesperson of the business machine firm has indicated that the expected useful service life of this machine is five years, with zero market value, but the company is not sure how long themachine will actually be needed. If the machine is rented, the company can cancel the lease at the end of any year. Assuming an income tax rate of 25%, a straight-line depreciation charge of $20,000 for each year the machine is kept, and an after-tax MARR of 10%, prepare an appropriate analysis to help the firm decide whether it is more desirable to purchase or rent.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?A lathe costs $56,000 and is expected to result in net cash inflows of $20,000 at the end of each year for three years and then have a market value of $10,000 at the end of the third year. The equipment could be leased for $22,000 a year, with the first payment due immediately. Solve, a. If the organization does not pay income taxes and its MARR is 10%, show whether the organization should lease or purchase the equipment. b. If the lathe is thought to be worth only, say, $18,000 per year to the organization, what is the better economic decision?
- A construction company excavator will take. A new excavator costs $150,000, lifespan 10 years, scrap value $25,000. The daily operating cost is $130. The annual repair-maintenance expense is estimated at $6,000. Alternatively, if an excavator is rented, the daily rental cost is $350. And there is no other expense. The firm's cost of capital is 25%. In this case, would you approve the purchase of the excavator?The X Company is considering purchasing a business machine for $100,000. An alternative is to rent it for $35,000 at the beginning of each year. The rental would include all repairs and services. If the machine is purchased, a comparable repair and service contract can be obtainedfor $1,000 per year. The salesperson of the business machine firm has indicated that the expected useful service life of this machine is five years, with zero market value, but the company is not sure how long the machine will be needed. If the machine is rented, the company can cancel the lease at the end of any year. Assuming an income tax rate of 25%, a straight-line depreciation charge of $20,000 for each year the machine is kept, and an after-tax MARR of 10%, prepare an appropriate analysis to help the firm decide whether it is more desirable to purchase or rent.Carr Corporation is considering new equipment. The equipment can be purchased from an overseas supplier for $3,900. The freight and installation costs for the equipment are $515. If purchased, annual repairs and maintenance are estimated to be $410 per year over the four-year useful life of the equipment. Alternatively, Carr can lease the equipment from a domestic supplier for $1,750 per year for four years, with no additional costs. Required: A. Prepare a differential analysis dated August 4 to determine whether Carr should lease (Alternative 1) or purchase (Alternative 2) the equipment. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign. If there is no amount or an amount is zero, enter "0". A colon (:) will automatically appear if required. (Hint: This is a “lease or buy” decision, which must be analyzed from the…
- Two proposals have been offered for streamlining the business operations of a customer call center. Proposal A has an investment cost of $30,000, an expected life of 5 years, property taxes of $450 per year, and no market value. Annual expenses are estimated to be $6,000. Proposal B has an investment cost of $38,000, an expected life of 4 years, property taxes of $600 per year, and no market value. Its annual operating expenses are expected to be $4,000. Using a MARR = 10% per year, which proposal should be recommended? Use the AW method and state your assumption(s).A firm considering the installation of an automatic data processing unit to handle some of its accounting operations. Machines for that purpose may be purchased for P20,000, or maybe leased for P8,000 for the first year and P1,000 less every year now and then until the end of the 4th year. If money is worth 15%, is it advisable to rent or buy the machine?MAG Industrial needs 1000 square meters of storage space. Purchasing land for $80,000 and then erecting a temporary metal building at $70 persquare meter is one option. The president hopes to sell the land for $100,000 and the building for $20,000 after 3 years. Another option is to lease space for $30 per square meter per year payable at the beginning of each year. The MARR is 20%. Perform a present worth analysis of the building and leasing alternatives to determine the sensitivity of the decision if the construction cost decreases by 10% to $63 per square meter and the lease cost remainsat $30 per square meter per year.
- RKE & Associates is considering the purchase of a building it currently leases for $30,000 per year. The owner of the building put it up for sale at a price of $170,000, but because the firm has been a good tenant, the owner offered to sell it to RKE for a cash price of $160,000 now. If purchased now, how long will it be before the company recovers its investment at an interest rate of 15% per year? Solve by speadsheet function or factor.A proprietor (CHRISTIA) who just inherited a building is considering using it in a new business venture. Projections for the business are: revenue of $100,000, fixed cost of $30,000, and variable cost of $50,000. If the business is not started, the owner will work for a company for a wage of $23,000. Also, there have been two offers to rent the building, one for $1,000 per month and one for $1,200 per month. What is the relevant cost of the building (per annum) to be consider in determining whether to start the business?A contractor is considering the following two alternatives: Purchase a new computer system for $45,000. The system is expected to last 6 years with a salvage value of $7,000. Lease a new computer system for $9,000 per year, payable in advance (at the start of the year). The system should last for 6 years. If a MARR of 6% is used, which alternative should be selected using a net present worth analysis? Which alternative would you select using an annualized cost method of analysis?