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In: Finance
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: 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 16%. 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 $250,000 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? Do not round intermediate calculations. Round your answer to the nearest dollar. $
Solutions
jeff jeffy answered 1 year agoRelated Solutions
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...
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:
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, property taxes, and...
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:
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 of 15%. It...
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.
• The machinery falls into the MACRS 3-year class (.3333, .4445,
.1481. .0741).
• 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...
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:
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 15%. It...
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:
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, property taxes, and...
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:
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, property taxes, and...
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:
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, property taxes, and...
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