Question

Advanced Computers has decided to proceed with the manufacture and distribution of the virtual

keyboard (VK) the company has developed. To undertake this venture, the company needs to

obtain equipment for the production of the microphone for the key board. Because of the

required sensitivity of the microphone and its small size, the company needs specialized

equipment for production.

Lucas Johnson, the company president, has found a vendor for the equipment. Memtech

Acoustical Equipment has offered to sell Advanced Computers the necessary equipment at a

price of $4.3 million. Because of the rapid development of new technology, the equipment will

be fully depreciated after four years with the straight line depreciation approach. At the end of

the fourth year, the market value of the equipment is expected to be $450,000.

Alternatively, the company can lease the equipment. Two leasing companies, Hendrix Leasing

and International Leasing Corporation, offered their leasing terms to Advanced Computers.

Hendrix proposed the following lease contract: The lease contract calls for monthly payment of

$90,000 due at the beginning of each month for four years. Additionally, Advanced Computers

must make a security deposit $200,000 at the beginning of the lease contract (i.e. at the

beginning of the first month) and the deposit will be returned when the lease expires at the end of

the last month.

International Leasing Corporation proposed the following lease contract: The lease contract calls

for monthly payment of $91,500 due at the beginning of each month for four years without

security deposit.

Advanced Computers can borrow a loan with the interest rate of 10% per year from a bank to

finance the equipment. The company has a marginal tax rate of 21%.

Questions:

1. Use Excel to calculate the net present values (NPVs) (it is also called net advantage to

leasing (NAL)) for Advanced Computers based on the lease contracts proposed by

Hendrix Leasing and International Leasing Corporation, respectively.

I am re-posting this question because the previous answer I received did not have a clear explanation

Answer 1

NPV for advanced computers based on the lease contract proposed byhendrix leasing and international leasing corporation respectively is gieven below in screenshots from excel sheet attached here in.

Please note that i ii have attached 3 images of excel which are "with excel formulas" and 3 images from excel which are "without excel formulas"