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In: Finance
You need a particular piece of equipment for your production process. An equipment-leasing company has offered...
You need a particular piece of equipment for your production process. An equipment-leasing company has offered to lease the equipment to you for $ 10,000 per year if you sign a guaranteed 5-year lease (the lease is paid at the end of each year). The company would also maintain the equipment for you as part of the lease. Alternatively, you could buy and maintain the equipment yourself. The cash flows from doing so are listed below (the equipment has an economic life of 5 years). If your discount rate is 7.1 %, what should you do?
| year 0 | year 1 | year 2 | year 3 | year 4 | year 5 |
| -39,200 | -2,100 | -2,100 | -2,100 | -2,100 | -2,100 |
The net present value of the leasing alternative is $ nothing. (Round to the nearest dollar.)
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I HAVE ALSO EXPLAINED, HOW TO GET PV FACTORS FOR GIVEN
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jeff jeffy answered 8 months agoRelated Solutions
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5-year
lease (the lease is paid at the end of each year). The company
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Alternatively, you could buy and maintain the equipment yourself.
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You need a particular piece of equipment for your production process. An equipment-leasing company has offered...
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process. An equipment-leasing company has offered to lease the
equipment to you for $ 10,100 per year if you sign a guaranteed
5-year lease (the lease is paid at the end of eachyear). The
company would also maintain the equipment for you as part of the
lease. Alternatively, you could buy and maintain the equipment
yourself. The cash flows from doing so are listed below(the
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You need a particular piece of equipment for your production process. An equipment-leasing company has offered...
You need a particular piece of equipment for your production
process. An equipment-leasing company has offered to lease the
equipment to you for $ 10 comma 500 per year if you sign a
guaranteed 5-year lease (the lease is paid at the end of each
year). The company would also maintain the equipment for you as
part of the lease. Alternatively, you could buy and maintain the
equipment yourself. The cash flows from doing so are listed below
(the equipment...
You are considering leasing a piece of equipment. Compute the Present Value of Leasing Costs (after...
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details of the lease are as follows:
Annual Lease Payments = $12,400 (due at Beginning of Year)
Lease Term = 5 Years
Corporate Tax Rate = 30%
Present Value Discount Rate = 7%
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would impact this decision and explain your reasoning with
examples.
(the previous answer did not satisfy me,...
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