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 10 months agoRelated Solutions
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...
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...
Bar Delivery Company purchased a new delivery truck for $36,000 on April 1, 2019. The truck...
Bar Delivery Company purchased a new delivery truck for $36,000
on April 1, 2019. The truck is expected to have a service life of 5
years or 120,000 miles and a residual value of $3,000. The truck
was driven 10,000 miles in 2019 and 18,000 miles in 2020. Bar
computes depreciation expense to the nearest whole month.
Compute depreciation expense for 2019 and 2020 using the
following methods: (Round your answers to the nearest
dollar.)
Straight-line method
2019
$
2020...
Bird Wing Bedding can lease an asset for 4 years with payments of $29,000 due at...
Bird Wing Bedding can lease an asset for 4 years with payments
of $29,000 due at the beginning of the year. The firm can borrow at
a 5% rate and pays a 25% federal-plus-state tax rate. The lease
qualifies as a tax-oriented lease. What is the cost of leasing? Do
not round intermediate calculations. Round your answer to the
nearest dollar.
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