(1)
Case Summary:
LS Inc wants to acquire new market data and quotation system for its new home office. The system receives the information from online services and 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 an 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 the residual value is estimated at $200,000. They thought of opting for leasing which will cost $260,000 and includes maintenance cost. Federal plus state tax is 40%.
To calculate:
The
(2)
To discuss: The discounting rate find to calculate the present value.
Want to see the full answer?
Check out a sample textbook solutionChapter 19 Solutions
EBK FINANCIAL MANAGEMENT: THEORY & PRAC
- Which of the following discounts future cash flows to their present value at the expected rate of return, and compares that to the Initial Investment? A. internal rate of return (IRR) method B. net present value (N PV) C. discounted cash flow model D. future value methodarrow_forwardWhere does the discount rate from present value came from? How to solve it?arrow_forwardWhat is the equation to calculate the payback period?arrow_forward
- How do I calculate the Free Cash Flow from the following? What would it be?arrow_forwardThis method evaluates the return of an investment by dividing the annual average income by the average investment, Select one: a. Discounted Approach b. Simple rate of return Method c. Cash Payback Method d. Internal Rate of Return Methodarrow_forwardPlease answer the following questions 1. _________________ is the discounted net future cash inflows divided by the initial cash outlay. a.Payback b.NRV c.Profitability Index d.IRR 2. __________________________ serves as a framework for measuring performance. a.NRV b.Payback c.Profitability Index d.Balanced Scorecard 3. Which of the following is a performance measures of the balanced scorecard: a.internal Business perspective b.all of the answers are correct c.financial Perspective d.customer perspectivearrow_forward
- Consider the calculation of an external rate of return (ERR). The positive cash flows in the cash flow profile are moved forward to t = n using what value of i in the (F|P,i,n–t) factors? a. 0 b. The unknown value of ERR (i′) c. MARR d. IRR.arrow_forwardWhich of the following methods consider the time value of money? A. payback and accounting rate of return B. payback and internal rate of return C. internal rate of return and accounting rate of return D. internal rate of return and net present valuearrow_forwardYou plan to analyze the value of a potential investment by calculating the sum of the present values of its expected cash flows. If the discount rate decreases the it would lower the calculated value of the investment. Group of answer choices True Falsearrow_forward
- a) what is the discounted payback period? b) what is the NPV? c)What is the IRR? note: please you dont use excel.arrow_forwardWhat are the similarities between the time value of money formulas and the NPV analysis?arrow_forwardA centerpiece of any study of finance is "valuation." A simple function, "V=l/R," can be used to describe an asset's "value." What does the "R" in that expression stand for? O a future cash flow O a current cash flow O a market-determined discount rate O a variable income measure O a measure of probabilityarrow_forward
- Intermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage LearningPrinciples of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College