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Lease versus Buy Big Sky Mining Company must install $1.5 million of new machinery in its...
Lease versus Buy
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 14%. It would be nonamortizing, with only interest paid at the end of each year for four years and the principal repaid at Year 4.
The lease terms call for $400,000 payments at the end of each of the next 4 years.
Big Sky Mining has no use for the machine beyond the expiration of the lease, and the machine has an estimated residual value of $300,000 at the end of the 4th year.
| MACRS | |
| Year | Allowance Factor |
| 1 | 0.3333 |
| 2 | 0.4445 |
| 3 | 0.1481 |
| 4 | 0.0741 |
What is the NAL of the lease? Round your answer to the nearest dollar.
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jeff jeffy answered 2 years agoRelated Solutions
Lease versus Buy Big Sky Mining Company must install $1.5 million of new machinery in its...
Lease versus Buy
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,...
Lease versus Buy Big Sky Mining Company must install $1.5 million of new machinery in its...
Lease versus Buy
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,...
Lease versus Buy Big Sky Mining Company must install $1.5 million of new machinery in its...
Lease versus Buy 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...
Lease versus Buy Big Sky Mining Company must install $1.5 million of new machinery in its...
Lease versus Buy
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...
Lease versus Buy Big Sky Mining Company must install $1.5 million of new machinery in its...
Lease versus Buy
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...
Lease versus Buy Big Sky Mining Company must install $1.5 million of new machinery in its...
Lease versus Buy
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 35%.
The loan would have an interest rate...
Lease versus Buy Big Sky Mining Company must install $1.5 million of new machinery in its...
Lease versus Buy 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...
Problem 19-04 Lease versus Buy Big Sky Mining Company must install $1.5 million of new machinery...
Problem 19-04
Lease versus Buy
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 35%.
The loan would have an...
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...
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