Question

In: Accounting

Describe the differences between leasing a piece of equipment and purchasing it outright and financing the...

Describe the differences between leasing a piece of equipment and purchasing it outright and financing the purchase with a loan. Then, compare the lease payments to the loan payments. Next, compare the tax benefits. What are the differences at the end of the lease and the loan? Which is better for a corporation, leasing or purchasing equipment outright? Lastly, identify the factors that would impact this decision and explain your reasoning with examples.

(the previous answer did not satisfy me, for example it did not clearly explain the tax implications)

Solutions

Expert Solution

ekkarill92 answered 1 year ago
Next > < Previous

Related Solutions

Describe the differences between leasing a piece of equipment and purchasing it outright and financing the...
Describe the differences between leasing a piece of equipment and purchasing it outright and financing the purchase with a loan. Then, compare the lease payments to the loan payments. Next, compare the tax benefits. What are the differences at the end of the lease and the loan? Which is better for a corporation, leasing or purchasing equipment outright? Lastly, identify the factors that would impact this decision and explain your reasoning with examples.
Banana Inc. is considering either purchasing or leasing a $600,000 piece of specialized equipment. The equipment...
Banana Inc. is considering either purchasing or leasing a $600,000 piece of specialized equipment. The equipment has a life of 5 years, belongs in a 30% CCA class, and will have no residual value. The cost of debt is is 12% for this purchase. A lease on this equipment for 5 years is priced at $150,000 a year. Banana Inc.'s corporate tax rate is 34%. What is Banana Inc.'s break-even lease payment? a) $182,968 b) 170,802 c) $109,057 d) $133,677...
Reflect upon the differences between purchasing a $30,000 vehicle and leasing it. Provide one scenario in...
Reflect upon the differences between purchasing a $30,000 vehicle and leasing it. Provide one scenario in which it would be advantageous for a company to purchase the vehicle and another scenario in which it would be advantageous to lease. * Please explain clearly your answer. Thank you!
Explain the differences between purchasing an asset and leasing an asset. What are some "good" reasons...
Explain the differences between purchasing an asset and leasing an asset. What are some "good" reasons for opting to lease rather than purchase an asset? What are typical incremental cash flows, and how do you determine the net advantage to leasing
Walther Corporation is deciding between purchasing needed equipment or leasing it. If purchased, it has calculated...
Walther Corporation is deciding between purchasing needed equipment or leasing it. If purchased, it has calculated its total expected after-tax cash outflows each year as follows: Year 1 $250,000; Year 2 $225,000; Year 3 $200,000; Year 4 $150,000; and Year 5 $100,000 with annual cash flows assumed to be generated evenly throughout the year (use the mid-year adjustment). If leased, the annual after-tax lease payment of $187,500 would be due at the beginning of each of the next five years....
You are considering leasing a piece of equipment. Compute the Present Value of Leasing Costs (after...
You are considering leasing a piece of equipment. Compute the Present Value of Leasing Costs (after taxes). The 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% a) -54,401 b) -15,253 c) -48,297 d) -35,590 e) -39,149
Refl   Reflect upon the differences between purchasing a $30, 000 vehicle and leasing it. Provide one scenario...
Refl   Reflect upon the differences between purchasing a $30, 000 vehicle and leasing it. Provide one scenario in which it would be advantageous for a com company to purchase the vehicle, and another scenario in which it would be be advantageous to lease.
Write a brief but persuasive argument on purchasing or leasing a new $25,000,000.00 piece of medical...
Write a brief but persuasive argument on purchasing or leasing a new $25,000,000.00 piece of medical equipment.
Praeda Inc. has the choice of buying a piece of equipment or leasing it. The purchase...
Praeda Inc. has the choice of buying a piece of equipment or leasing it. The purchase cost of the equipment will be $150,000. For tax purposes, the depreciation on the machine will be full, straight-line depreciation over 8 years. The machine will be used for 5 years, regardless of whether it is purchased or leased. The machine is expected to have a market value of $76,250 at the end of the 5 years. The lessor will require annual payments of...
Q1. Discuss the differences between operating, investing and financing activities, then describe the cash flows between...
Q1. Discuss the differences between operating, investing and financing activities, then describe the cash flows between a company and its stakeholders Q2. ALHAMD Watch Company manufactures two product lines—digital watches and analog watches. Income statement data for the most recent year follow: Total Digital Watches Analog Watches Sales revenue $850,000 $500,000 $350,000 Variable expenses (530,000) (250,000) (280,000) Contribution margin $320,000 $250,000 $70,000 Fixed expenses (180,000) (90,000) (90,000) Operating income (loss) $140,000 $160,000 $(20,000) Assuming fixed costs remain unchanged, and that...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT