Question
In: Finance
A firm can lease a truck for 4 years at a cost of $36,000 annually. It...
A firm can lease a truck for 4 years at a cost of $36,000 annually. It can instead buy a truck at a cost of $86,000, with annual maintenance expenses of $16,000. The truck will be sold at the end of 4 years for $26,000.
a. What is the equivalent annual cost of buying and maintaining the truck if the discount rate is 10%? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Solutions
Expert Solution
WE CAN ALSO SOLVE USING OCF METHOD, BUT THIS IS STILL A
SIMPLE METHOD. THANK YOU
jeff jeffy answered 1 year agoRelated Solutions
A firm can lease a truck for 4 years at a cost of $41,000 annually. It...
A firm can lease a truck for 4 years at a cost of $41,000
annually. It can instead buy a truck at a cost of $91,000, with
annual maintenance expenses of $21,000. The truck will be sold at
the end of 4 years for $31,000. a. Calculate present value if the
discount rate is 10%
A firm can lease a truck for 5 years at a cost of $42,000 annually. It...
A firm can lease a truck for 5 years at a cost of $42,000
annually. It can instead buy a truck at a cost of $92,000, with
annual maintenance expenses of $22,000. The truck will be sold at
the end of 5 years for $32,000.
a. What is the equivalent annual cost of buying
and maintaining the truck if the discount rate is 12%? (Do
not round intermediate calculations. Round your answer to 2 decimal
places.)
b. Which is the...
Exercise #4: A firm can lease a truck for 5 years at a cost of $45,000...
Exercise #4: A firm can lease a truck for 5 years at a cost of
$45,000 annually. It can instead buy a truck at a cost of $95,000,
with annual maintenance expenses of $25,000. The truck will be sold
at the end of 5 years for $35,000. The cost of capital is 15%.
Which is a better option? A. EAC of Lease = [11] B. PV of all Costs
of Purchase = [12] C. EAC of Purchase = [13] D....
Your firm is considering leasing a new computer. The lease lasts for 4 years. The lease...
Your firm is considering leasing a new computer. The lease lasts
for 4 years. The lease calls for 5 payments of $450 per year with
the first payment occurring immediately. The computer would cost
$5,900 to buy and would be depreciated using the straight-line
method to zero salvage over 4 years. The firm can borrow at a rate
of 5%. The corporate tax rate is 20%. What is the NPV of the
lease?
Your firm is considering leasing a new computer. The lease lasts for 4 years. The lease...
Your firm is considering leasing a
new computer. The lease lasts for 4 years. The lease calls for 5
payments of $450 per year with the first payment occurring
immediately. The computer would cost $5,900 to buy and would be
depreciated using the straight-line method to zero salvage over 4
years. The firm can borrow at a rate of 5%. The corporate tax rate
is 20%. What is the NPV of the lease?
Your firm is considering leasing a new computer. The lease lasts for 4 years. The lease...
Your firm is considering leasing a
new computer. The lease lasts for 4 years. The lease calls for 5
payments of $450 per year with the first payment occurring
immediately. The computer would cost $5,900 to buy and would be
depreciated using the straight-line method to zero salvage over 4
years. The firm can borrow at a rate of 5%. The corporate tax rate
is 20%. What is the NPV of the lease?
Your firm is considering leasing a new computer. The lease lasts for 4 years. The lease...
Your firm is considering leasing a new computer. The lease lasts
for 4 years. The lease calls for 5 payments of $450 per year with
the first payment occurring immediately. The computer would cost
$5,900 to buy and would be depreciated using the straight-line
method to zero salvage over 4 years. The firm can borrow at a rate
of 5%. The corporate tax rate is 20%. What is the NPV of the
lease?
Johnson Company purchases a $36,000 truck that is estimated to last nine years, with no salvage...
Johnson Company purchases a $36,000
truck that is estimated to last nine years, with no salvage value.
If Johnson uses the straight line method of depreciation, what will
the accumulated depreciation amount to after two years of
use?
a. $0
b. $8,000
c. $9,000
d. $36,000
On January 1, Town Spa Pizza purchased a delivery truck for $36,000. The truck has an...
On January 1, Town Spa Pizza purchased a delivery truck for
$36,000. The truck has an estimated useful life of 10 years or
140,000 miles and an estimated residual value of $8,000. Town Spa’s
fiscal year is the calendar year. Calculate the amounts requested
below.
1)Depreciation Expense for the year, using the production
method. Assume 22,000 miles were driven this year:
A) $4,400
B) $5,657
C)2,800
D)3,600
2)The total accumulated depreciation after the truck has been
used for 5 years,...
Information for questions 1-4: On January 1, Town Spa Pizza purchased a delivery truck for $36,000....
Information for questions 1-4: On
January 1, Town Spa Pizza purchased a delivery truck for $36,000.
The truck has an estimated useful life of 10 years or 140,000 miles
and an estimated residual value of $8,000. Town Spa’s fiscal year
is the calendar year. Calculate the amounts requested below.
1. Depreciation
Expense for the year, using the production method. Assume 22,000
miles were driven this year.
a.
$4,400
c. $2,800
b. $5,657
d. $3,600
2. The total
accumulated...
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