Question
In: Finance
Freedom Ltd is considering whether to lease or buy an advanced machine for its new product....
Freedom Ltd is considering whether to lease or buy an advanced machine for its new product. The following information is available for this decision: Buy: The purchase price of the machine is $4.85 million. The machine will be depreciated using straight-line method over 4 years with a zero salvage value. Lease: The annual lease payments will be $1.1 million, payable at the beginning of each of the four years of the lease. The annual interest rate of secured debt is 11.67%. The corporate tax rate is 40%.
(a) Should the firm lease or buy the machine? Why?
(b) Calculate the maximum amount of lease payment that Freedom Ltd is willing to pay.
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jeff jeffy answered 1 year agoRelated Solutions
Freedom Ltd is considering whether to lease or buy an advanced machine for its new product....
Freedom Ltd is considering whether to lease or buy an advanced
machine for its new product. The following information is available
for this decision: Buy: The purchase price of the machine is $4.85
million. The machine will be depreciated using straight-line method
over 4 years with a zero salvage value. Lease: The annual lease
payments will be $1.1 million, payable at the beginning of each of
the four years of the lease. The annual interest rate of secured
debt is...
Freedom Ltd is considering whether to lease or buy an advanced machine for its new product....
Freedom Ltd is considering whether to lease or buy an advanced
machine for its new product. The following information is available
for this decision: Buy: The purchase price of the machine is $4.85
million. The machine will be depreciated using straight-line method
over 4 years with a zero salvage value. Lease: The annual lease
payments will be $1.1 million, payable at the beginning of each of
the four years of the lease. The annual interest rate of secured
debt is...
Freedom Ltd is considering whether to lease or buy an advanced machine for its new product....
Freedom Ltd is considering whether to lease or buy an advanced
machine for its new product. The following information is available
for this decision: Buy: The purchase price of the machine is $4.85
million. The machine will be depreciated using straight-line method
over 4 years with a zero salvage value. Lease: The annual lease
payments will be $1.1 million, payable at the beginning of each of
the four years of the lease. The annual interest rate of secured
debt is...
Question 3 (17 marks) Freedom Ltd is considering whether to lease or buy an advanced machine...
Question 3 Freedom Ltd is considering whether to
lease or buy an advanced machine for its new product. The following
information is available for this decision: Buy: The purchase price
of the machine is $4.85 million. The machine will be depreciated
using straight-line method over 4 years with a zero salvage value.
Lease: The annual lease payments will be $1.1 million, payable at
the beginning of each of the four years of the lease. The annual
interest rate of secured...
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