Question

In: Finance

Hi-Tek Industries is considering a lease with four annual payments of $4,000 each. The firm can...

Hi-Tek Industries is considering a lease with four annual payments of $4,000 each. The firm can borrow at a rate of 6.7 percent and has a tax rate of 21 percent. The leased asset would cost $15,000 to purchase, have a tax life of 4 years, and would be depreciated on a straightline basis to zero. What would be the incremental cash flow in Year 4 from leasing instead of purchasing if the purchased asset had a pretax salvage value of $500?

Solutions

Expert Solution

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

Each of the four independent situations below describes a lease requiring annual requiring annual lease payments...
Each of the four independent situations below describes a lease requiring annual requiring annual lease payments of $30,000. Situation 1 2 3 4 Lease term (years) 4 4 4 4 Asset's Useful Life (years) 6 6 5 6 Asset's fair value $132,000 $123,000 $129,000 $117,00 Bargain Purchase option? no no yes no Annual lease payments Beg. of yr. Beg. of yr. End of yr. End of yr. Lessor's implicit rate (known by the lessee) 5% 5% 7% 6% Lessee's incremental...
Each of the four independent situations below describes a finance lease in which annual lease payments...
Each of the four independent situations below describes a finance lease in which annual lease payments are payable at the beginning of each year. The lessee is aware of the lessor’s implicit rate of return. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Situation 1 2 3 4 Lease term (years) 4 7 5 8 Lessor's rate of return 10 % 11...
Each of the four independent situations below describes a capital lease in which annual lease payments...
Each of the four independent situations below describes a capital lease in which annual lease payments are payable at the beginning of each year. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Situation 1 2 3 4 Lease term (years) 6 9 7 10 Lessor’s rate of return 10 % 11 % 9 % 12 % Fair value of leased asset $...
Each of the four independent situations below describes a finance lease in which annual lease payments...
Each of the four independent situations below describes a finance lease in which annual lease payments are payable at the beginning of each year. The lessee is aware of the lessor’s implicit rate of return. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Situation 1 2 3 4 Lease term (years) 6 9 7 10 Lessor's rate of return 9 % 10...
Each of the four independent situations below describes a lease requiring annual lease payments of $30,000....
Each of the four independent situations below describes a lease requiring annual lease payments of $30,000. Situation 1 Situation 2 Situation 3 Situation 4 Lease term (years) 4 4 4 4 Asset's useful life (years) 6 6 5 6 Asset's fair value $132,000 $114,000 $129,000 $115,000 Bargain purchase option? No No Yes No Annual lease payments Beg. of yr. End of yr. Beg. of yr. End of yr. Lessor's implicit rate (known by lessee) 5% 6% 6% 5% Lessee's incremental...
Each of the four independent situations below describes a lease requiring annual lease payments of $30,000....
Each of the four independent situations below describes a lease requiring annual lease payments of $30,000. Situation 1 Situation 2 Situation 3 Situation 4 Lease term (years) 4 4 4 4 Asset's useful life (years) 6 6 5 6 Asset's fair value $132,000 $114,000 $129,000 $115,000 Bargain purchase option? No No Yes No Annual lease payments Beg. of yr. End of yr. Beg. of yr. End of yr. Lessor's implicit rate (known by lessee) 5% 6% 6% 5% Lessee's incremental...
Each of the four independent situations below describes a finance lease in which annual lease payments...
Each of the four independent situations below describes a finance lease in which annual lease payments are payable at the beginning of each year. The lessee is aware of the lessor’s implicit rate of return. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Situation 1 2 3 4 Lease term (years) 4 7 5 8 Lessor's rate of return 10 % 11...
Each of the four independent situations below describes a finance lease in which annual lease payments...
Each of the four independent situations below describes a finance lease in which annual lease payments are payable at the beginning of each year. The lessee is aware of the lessor’s implicit rate of return. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Situation 1 2 3 4 Lease term (years) 5 8 6 9 Lessor's rate of return 10 % 11...
Each of the four independent situations below describes a sales-type lease in which annual lease payments...
Each of the four independent situations below describes a sales-type lease in which annual lease payments of $15,500 are payable at the beginning of each year. Each is a finance lease for the lessee. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Situation 1 2 3 4 Lease term (years) 3 3 3 3 Asset’s useful life (years) 3 4 4 6...
Each of the four independent situations below describes a sales-type lease in which annual lease payments...
Each of the four independent situations below describes a sales-type lease in which annual lease payments of $19,500 are payable at the beginning of each year. Each is a finance lease for the lessee. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Situation 1 2 3 4 Lease term (years) 5 5 5 5 Asset’s useful life (years) 5 6 6 8...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT