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In: Finance
Kaiser Permanente must install a new $1.5 million computer to track patient records in its multiple...
Kaiser Permanente must install a new $1.5 million computer to track patient records in its multiple service areas. It plans to use the computer for only three years, at which time a brand new system will be acquired that will handle both billing and patient records. The company can obtain a 10 percent bank loan to buy the computer or it can lease the computer for three years. Assume that the following facts apply to the decision: - The computer falls into the three-year class for tax depreciation, so the MACRS allowances are 0.33, 0.45, 0.15, and 0.07 in Years 1 through 4, respectively. - The company's marginal tax rate is 34 percent. -Tentative lease terms call for payments of $500,000 at the end of each year. - The best estimate for the value of the computer after three years of wear and tear is $500,000. What are the NAL and IRR of the lease? Should the computer system be purchased?
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jeff jeffy answered 6 months agoRelated Solutions
Kaiser Permanente must install a new $1.5 million computer to track patient records in its multiple...
Kaiser Permanente must install a new $1.5 million computer to
track patient records in its multiple service areas. It plans to
use the computer for only three years, at which time a brand new
system will be acquired that will handle both billing and patient
records. The company can obtain a 10 percent bank loan to buy the
computer or it can lease the computer for three years. Assume that
the following facts apply to the decision:
- The computer...
AHS must install a new $1.5 million computer to track patient records in its multiple service...
AHS must install a new $1.5 million computer to track patient
records in its multiple service areas. It plans to use the computer
for only 3 years, at that time a new system will be acquired that
will handle both billing and patient records. The company can
borrow money at a before-tax cost of 10%. In lieu of buying, AHS
could lease the computer for 3 years.
Assume that the following facts apply:
The computer falls into the 3-year class...
Big Sky Mining Company must install $1.5 million of new machinery in its Nevada mine. It...
Big Sky Mining Company must install $1.5 million of new
machinery in its Nevada mine. It can obtain a bank loan for 100% of
the purchase price, or it can lease the machinery. Assume that the
following facts apply.
(1) The machinery falls into the MACRS 3-year class.
(2) Under either the lease or the purchase, Big Sky must pay for
insurance, property taxes, and maintenance.
(3) The firm’s tax rate is 25%.
(4) The loan would have an interest...
Big Sky Mining Company must install $1.5 million of new machinery in its Nevada mine. It...
Big Sky Mining Company must install $1.5 million of new
machinery in its Nevada mine. It can obtain a bank loan for 100% of
the purchase price, or it can lease the machinery. Assume that the
following facts apply:
1. The machinery falls into the MACRS 3-year class.
2. Under either the lease or the purchase, Big Sky must pay for
insurance, property taxes, and maintenance.
3. The firm's tax rate is 25%
4. The loan would have an interest...
Big Sky Mining Company must install $1.5 million of new machinery in its Nevada mine. It...
Big Sky Mining Company
must install $1.5 million of new machinery in its Nevada mine. It
can obtain a bank loan for 100% of the purchase price, or it can
lease the machinery. Assume that the following facts apply:
The machinery falls into 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.)
Under either the lease or the
purchase, Big Sky must pay for insurance, property taxes, and...
Big Sky Mining Company must install $1.5 million of new machinery in its Nevada mine. It...
Big Sky Mining Company must install
$1.5 million of new machinery in its Nevada mine. It can obtain a
bank loan for 100% of the purchase price, or it can lease the
machinery. Assume that the following facts apply:
The machinery falls into the MACRS 3-year class
Under either the lease or the purchase, Big Sky must pay for
insurance, property taxes, and maintenance.
The firm’s tax rate is 40%
The loan would have an interest rate of 15%. It...
Big Sky Mining Company must install $1.5 million of new machinery in its Nevada mine. It...
Big Sky Mining Company must install $1.5 million of new
machinery in its Nevada mine. It can obtain a bank loan for 100% of
the purchase price, or it can lease the machinery. Assume that the
following facts apply.
• The machinery falls into the MACRS 3-year class (.3333, .4445,
.1481. .0741).
• Under either the lease or the purchase, Big Sky must pay for
insurance, property taxes, and maintenance.
• The firm’s tax rate is 40%.
• The loan...
Big Sky Mining Company must install $1.5 million of new machinery in its Nevada mine. It...
Big Sky Mining Company must install $1.5 million of new
machinery in its Nevada mine. It can obtain a bank loan for 100% of
the purchase price, or it can lease the machinery. Assume that the
following facts apply: The machinery falls into the MACRS 3-year
class. Under either the lease or the purchase, Big Sky must pay for
insurance, property taxes, and maintenance. The firm's tax rate is
30%. The loan would have an interest rate of 16%. It...
Big Sky Mining Company must install $1.5 million of new machinery in its Nevada mine. It...
Big Sky Mining Company
must install $1.5 million of new machinery in its Nevada mine. It
can obtain a bank loan for 100% of the purchase price, or it can
lease the machinery. Assume that the following facts apply:
The machinery falls into the
MACRS 3-year class.
Under either the lease or the
purchase, Big Sky must pay for insurance, property taxes, and
maintenance.
The firm's tax rate is
30%.
The loan would have an
interest rate of 15%. It...
Big Sky Mining Company must install $1.5 million of new machinery in its Nevada moine. It...
Big Sky
Mining Company must install $1.5 million of new machinery in its
Nevada moine. It can obtain a bank loan for 100% of the purchase
price, or it can lease the machinery. Assume that the following
facts apply.
(1)
The machinery falls into the MACRS 3-year class.
(2) Under
either the lease or the purchase, Bug Sky must pay for insurance,
property taxes, and maintenance.
(3)
The firm's tax rate is 25%
(4) The loan
would have an interest...
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