Campus Copy can lease the scanner for R250 000 per ye years from Secure Scan. Assume lease payments are made at the end of year an Copy is in the 30% tax bracket: What are Campus Copy's expected cash flows the scanner if the interest rate is 10%? Should Campus Copy lease the scanner? 5.5 Revision Exercise 5

Campus Copy can lease the scanner for R250 000 per ye years from Secure Scan. Assume lease payments are made at the end of year an Copy is in the 30% tax bracket: What are Campus Copy's expected cash flows the scanner if the interest rate is 10%? Should Campus Copy lease the scanner? 5.5 Revision Exercise 5

Fundamentals of Financial Management (MindTap Course List)

14th Edition

ISBN:9781285867977

Author:Eugene F. Brigham, Joel F. Houston

Publisher:Eugene F. Brigham, Joel F. Houston

Chapter12: Cash Flow Estimation And Risk Analysis

Section: Chapter Questions

Problem 10P: REPLACEMENT ANALYSIS The Dauten Toy Corporation currently uses an injection molding machine that was...

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REPLACEMENT ANALYSIS The Dauten Toy Corporation currently uses an injection molding machine that was purchased 2 years ago. This machine is being depreciated on a straight-line basis, and it has 6 years of remaining life. Its current book value is 2,100, and it can be sold for 2,500 at this time. Thus, the annual depreciation expense is 2,100/6 = 350 per year. If the old machine is not replaced, it can be sold for 500 at the end of its useful life. Dauten is offered a replacement machine which has a cost of 8,000, an estimated useful life of 6 years, and an estimated salvage value of 800. This machine falls into the MACRS 5-year class so the applicable depreciation rates are 20%, 32%, 19%, 12%, 11%, and 6%. The replacement machine would permit an output expansion, so sales would rise by 1,000 per year; even so, the new machines much greater efficiency would cause operating expenses to decline by 1,500 per year. The new machine would require that inventories be increased by 2,000, but accounts payable would simultaneously increase by 500. Dautens marginal federal-plus-state tax rate is 40%, and its WACC is 15%. Should it replace the old machine?
5:34 The old school is trying to decide whether they should purchase or lease a new high-speed photocopier and $750 each year to maintain the machine over the course of its six-year useful life. At the end of the sixth year, Old school expects to be able to lease the school the same copier for a payment of $750 at the beginning of the lease plus lease payments of $3,450 per year for four years. Lease payments include all maintenance. The dealer was unable to offer a lease longer than four years. Lease payments would be made at the end of the year. if the old school's discount rate is 8 percent, which alternative should it choose and why?
Q5. A physics lab is considering leasing a diagnostic scanner that costs $5,800,000, and it would be depreciated straight-line to zero over four years. Because of radiation contamination, it will actually be completely valueless in four years. You can lease it for four years. Assume tax rate is 21% for the leasing company (lessor) and zero for the lab. The cost of borrowing is 8%. Over what range of lease payments will the lease be profitable for both lessee and lessor?
Ma3. Question 5 An undertaking (lessor) leases a truck to a customer for 3 years. The value of the truck at the end of the lease is estimated at 40% of its original cost. Market data suggests that the likely range of residual values after 3 years is 40% to 50% of original cost. The lessee will guarantee any fall in the truck's residual value below 40% down to 25% of original cost. The lessor will bear the cost of any fall in residual value below 25% of original cost. A. Based on the above information, indicate whether the lease is an operating or finance lease. Provide appropriate reasons for your choice. B. Explain the treatment for operating lease payments according to IAS 17. C.GLtd a small company, leases a car from for three years at $10, 000 per month. The first four (4) months rental is payable on day one (1) and no rental is paid in months 34-36. i. Show the double entry treatment in the books of the lessee for rental in month 1. ii. Show the double entry…
A1 Tripple A Manufacturing needs to acquire a piece of equipment which will cost the company $80,000. It is estimated that in six years’ time the equipment can be salvaged for $20,000. The company’s bank has agreed to advance funds for the entire purchase price at 8 percent per annum payable in equal installments over the six years. Alternatively, the machine could be leased over the six years from the manufacturer, by way of an operating lease with annual lease payments of $14,000. Triple A’s tax rate is 40 percent and its cost of capital is 15 percent. The equipment has a CCA rate of 20 percent. If the machine is owned, annual maintenance costs will be $500. Required: Advise Triple A which alternative they should choose, providing them with calculations to support your recommendation. NOTE: PLEASE DONOT SOLVE IN EXCEL
6.1 Calculating Project NPV Paul Restaurant is considering the purchase of a $9,300 soufflé maker. The soufflé maker has an economic life of five years and will be fully depreciated by the straight-line method. The machine will produce 1,400 soufflés per year, with each costing $1.97 to make and priced at $4.95. The discount rate is 14 percent and the tax rate is 21 percent. Should the company make the purchase?
5.. new.. recheck a.. Indigo Inc. manufactures an X-ray machine with an estimated life of 12 years and leases it to Chambers Medical Center for a period of 10 years. The normal selling price of the machine is $524,166, and its guaranteed residual value at the end of the non-cancelable lease term is estimated to be $16,500. The hospital will pay rents of $63,400 at the beginning of each year. Indigo incurred costs of $258,000 in manufacturing the machine and $14,900 in legal fees directly related to the signing of the lease. Indigo has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 5%.Click here to view factor tables. (a) Discuss the nature of this lease in relation to the lessor.The nature of this lease in relation to the lessor is .Compute the amount of each of the following items. (Round present value factor calculations to 5 decimal…
Item 9 You work for a nuclear research laboratory that is contemplating leasing a diagnostic scanner (leasing is a common practice with expensive, high-tech equipment). The scanner costs $8,300,000, Because of radiation contamination, it will actually be completely valueless in four years. You can lease it for $2,385,000 per year for four years. Assume that the tax rate is 25 percent. You can borrow at 7 percent before taxes. Assume that the scanner will be depreciated as three-year property under the MACRS depreciation. What is the NAL of the lease? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Question 17 Boyertown Industrial Tools is considering a 2-year project to improve its production efficiency. They have spent $25,000 over the previous year researching a new machine press. Buying the new machine press for $500,000 is estimated to result in $300,000 in annual pretax cost savings and will provide quarterly dividends of $2,500 to the shareholders. The press falls in the MACRS three-year class, and it will have a salvage value at the end of the project of $100,000. The press also requires an initial investment in spare parts inventory of $50,000, along with an additional $5,000 in inventory for each succeeding year of the project. If the tax rate is 35, what is the aftertax salvage value for the machine press? Property Class Year 3Year 5 year 7 year 1 33.33 20.00 14.29 2 44.45…
Financial Option 2: Lease of $25 Million in EquipmentRationale for investment: The business’s current equipment is efficient, but it uses a substantial amount of electricity. Operating the production line also creates significant waste material, including waste plastics. The business is looking into leasing newer, more environmentally friendly equipment that will still allow it to be at least as efficient in production as it is now.Assumptions to consider: Annual cash flows generated with equipment: $4 million Discount rate is 12%  15-year useful life No salvage value What is the NPV?
Question 7 Warehouse A with a life of 10 years can be constructed now for $100,000 with no repair costs and a salvage value of $10,000. Alternatively, warehouse B with a life of 12 years can be constructed for $70,000 now with a salvage value of $5000, but requires $18,000 worth of repairs every 3 years. Both have equal usefulness and are needed indefinitely. Assuming the cost of money is 6%, which warehouse is a better deal and by most nearly how much per year? Full explain this question very fast solution sent me step by step Not:- Text typing work only
Mf2. Sunshine Oil & Gas is considering an investment in Perfect Lease. Given the following information, calculate the payback period (in months). Should Sunshine invest in Perfect Lease if management requires a payback period of less than 36 months? Acquisition cost of Perfect Lease $60,000 Drilling cost of one well $450,000 Estimated completion cost $600,000 Estimated selling price per bbl $55 Estimated lifting cost per bbl $20 State severance tax 6% Royalty interest 10% Estimated monthly production 750 bbls per month Payback period (in months, rounded to two decimal places): Based on payback, should Sunshine invest in Perfect Lease? (yes or no):