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In: Accounting
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 be purchased for $4,200,000 and depreciated at a 30% CCA rate or leased for a 5-year period for $800,000 per year (due at the beginning of each year). The firm can borrow at 8%, has a 40% marginal tax rate, and 12% WACC. The new machine has an expected useful life of 5 years and an expected salvage value of $1,000,000 at the end of the fifth year. Assume the company has other assets in the same CCA class. Calculate the Net Advantage to Leasing.
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ekkarill92 answered 2 years agoRelated Solutions
The lavish carpet manufacturing co. has decided to acquire a new machine that has an economic...
The lavish carpet
manufacturing co. has decided to acquire a new machine that has an
economic life of 10 years, with no residual value. The machine can
be purchased for $75,000 and the supplier is willing to advance
$45,000 of the purchase price at 12 percent. The loan is to be
repaid in equal instalments over 10 years. Lavish Carpet pays 40
percent corporate income tax and can claim 20 percent capital cost
allowances on the purchased asset. It expects...
1) The lavish carpet manufacturing co. has decided to acquire a new machine that has an...
1) The lavish carpet manufacturing co. has decided to
acquire a new machine that has an economic life of 10 years, with
no residual value. The machine can be purchased for $75,000 and the
supplier is willing to advance $45,000 of the purchase price at 12
percent. The loan is to be repaid in equal instalments over 10
years. Lavish Carpet pays 40 percent corporate income tax and can
claim 20 percent capital cost allowances on the purchased asset. It...
The Lavish Carpet Manufacturing Co. has decided acquire a new machine that has an economic life...
The
Lavish Carpet Manufacturing Co. has decided acquire a new machine
that has an economic life of 10 years, with no residual value. The
machine can be purchased for $75,000, and the supplier is willing
to advance $45,000 of the purchase price at 12 percent. The loan is
to be repaid in equal instalments over 10 years. Lavish Carpet pays
40 percent corporate income tax and can claim 20 percent capital
cost allowances on the purchased asset. It expects to...
Mary Products, Inc. has decided to introduce a new product, which can be manufactured by either...
Mary Products, Inc. has decided to introduce a new
product, which can be manufactured by either a computer-assisted
manufacturing system or a labor-intensive production system. The
manufacturing method will not affect the quality of the product.
The estimated manufacturing costs by the two methods are as
follows:
Computer-Assisted Manufacturing System
Labor-Intensive Production System
Direct Material
$6.00
$8.00
Direct Labor (DLH denotes direct-labor hours)
0.7DLH@$20
$14.00
1.3DLH@$15.6
$20.28
Variable mfg. overhead (applied based on DLH)
0.7DLH@$15
$10.50
1.3DLH@$15
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Fixed mfg....
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...
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...
Veritas Inc. has decided to acquire a new Hydraulic Excavator. It has three options. Caterpillar: purchase...
Veritas Inc. has decided to acquire a new Hydraulic Excavator.
It has three options. Caterpillar: purchase cost of $350,324 and
operating costs of $21,964 per year (paid at the end of each year).
John Deere: purchase cost of $285,068 and operating costs of
$20,274 per year (paid at the end of each year). Volvo: purchase
cost of $307,686 and operating costs of $15,767 per year (paid at
the end of each year). Assume that Geek Inc. has a budget of...
Jupiter Inc. has decided to acquire a new weather satellite. After considering several options it has...
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After considering several options it has narrowed its search to two
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$39998 per year (paid at the end of each year).
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Both satellites have a service life of 10 years. Based on the
defender-challenger approach and given that the...
Veritas Inc. has decided to acquire a new Hydraulic Excavator. It has three options. Caterpillar: purchase...
Veritas Inc. has decided to acquire a new Hydraulic Excavator.
It has three options.
Caterpillar: purchase cost of $356609 and operating costs of
$20439 per year (paid at the end of each year).
John Deere: purchase cost of $280828 and operating costs of
$24980 per year (paid at the end of each year).
Volvo: purchase cost of $311464 and operating costs of $18932
per year (paid at the end of each year).
Assume that Geek Inc. has a budget of...
Lewis Securities Inc. has decided to acquire a new market data and quotation system for its...
Lewis Securities Inc. has decided to acquire a new market data
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or stores it for later retrieval by the firm’s brokers. The system
also permits customers to
call up current quotes on terminals in the lobby.
The equipment costs $1,000,000 and, if it were purchased, Lewis
could obtain a...
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