Question
In: Finance
Mattel, Inc. has decided to acquire a new equipment at a cost of $760,000. The equipment...
Mattel, Inc. has decided to acquire a new equipment at a cost of $760,000. The equipment has an expected life of 6 years and will be depreciated using 5-year MACRS with rates of .20, .32, .192, .1152, .1152, and .0576 (note that 5-year MACRS depreciation actually takes place over 6 years). There is no actual salvage value. Mass Financing has offered to lease the equipment to Mattel for $148,000 a year for 6 years. Mattel has a cost of equity of 10.8 percent, a pre-tax cost of debt of 6.5 percent, and a marginal tax rate of 25 percent. Should Mattel lease or buy?
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Mattel should lease because NPV = $21,542.69 |
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Mattel should lease because NPV = $27,630.06 |
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Mattel should buy because NPV = $23,514.35 |
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Mattel should buy because NPV = $28,375.29 |
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Mattel should lease because NPV = $18,589.72 |
Solutions
jeff jeffy answered 9 months agoRelated Solutions
Mattel, Inc. has decided to acquire a new equipment at a cost of $760,000. The equipment...
Mattel, Inc. has decided to acquire a new equipment at a cost of
$760,000. The equipment has an expected life of 6 years and will be
depreciated using 5-year MACRS with rates of .20, .32, .192, .1152,
.1152, and .0576 (note that 5-year MACRS depreciation actually
takes place over 6 years). There is no actual salvage value. Mass
Financing has offered to lease the equipment to Mattel for $148,000
a year for 6 years. Mattel has a cost of equity...
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Sirius has decided to acquire a new equipment at a cost of
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depreciated using 5-year MACRS with rates of .20, .32, .192, .1152,
.1152, and .0576 (note that 5-year MACRS depreciation actually
takes place over 6 years). There is no actual salvage value. Travis
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year for 6 years, with lease payment at the end of...
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Comey Products has decided to acquire some new equipment having
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Comey Products has decided to acquire some new equipment having a $170,000 purchase price. The equipment...
Comey Products has decided to acquire some new equipment
having a $170,000 purchase price. The equipment will last 4 years
and is in the MACRS 3-year class. (The depreciation rates for Year
1 through Year 4 are equal to 0.3333, 0.4445, 0.1481, and 0.0741.)
The firm can borrow at a 5% rate and pays a 25% federal-plus-state
tax rate. Comey is considering leasing the property but wishes to
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purchasing...
Comey Products has decided to acquire some new equipment having a $170,000 purchase price. The equipment...
Comey Products has decided to acquire some new equipment
having a $170,000 purchase price. The equipment will last 4 years
and is in the MACRS 3-year class. (The depreciation rates for Year
1 through Year 4 are equal to 0.3333, 0.4445, 0.1481, and 0.0741.)
The firm can borrow at a 5% rate and pays a 25% federal-plus-state
tax rate. Comey is considering leasing the property but wishes to
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purchasing...
Duhok Inc. has decided to acquire a new machine that can either be purchased for $4,200,000...
Duhok Inc. has decided to acquire a new machine that can either
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leased for a 5-year period for $800,000 per year (due at the
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Assume that Geek Inc. has a budget of...
Lewis Securities Inc. has decided to acquire a new market data and quotation system for its...
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