Question
In: Finance
Angie Corporation is evaluating whether to lease or purchase equipment. Its tax rate is 30 percent. If...
Angie Corporation is evaluating whether to lease or purchase equipment. Its tax rate is 30 percent. If the company purchases the equipment for $2,000,000 it will depreciate it over 4 years, using straight-line depreciation. No salvage value is expected. If the company enters into a 4-year lease, the lease payment is $600,000 per year, payable at the beginning of each year. If the company purchases the equipment it will borrow from its bank at an interest rate of 10 percent.
Calculate the cost of leasing the equipment.
Solutions
jeff jeffy answered 11 months agoRelated Solutions
Angie Corporation is evaluating whether to lease or purchase equipment. Its tax rate is 30 percent. If...
Angie Corporation is evaluating whether to lease or purchase
equipment. Its tax rate is 30 percent. If the company
purchases the equipment for $2,000,000 it will depreciate it over 4
years, using straight-line depreciation. No salvage value is
expected. If the company enters into a 4-year lease, the
lease payment is $600,000 per year, payable at the beginning of
each year. If the company purchases the equipment it will borrow
from its bank at an interest rate of 10 percent.
Calculate the...
Harris Corporation is evaluating whether to lease or purchase equipment. Its tax rate is 25 percent....
Harris Corporation is evaluating whether to lease or
purchase equipment. Its tax rate is 25 percent. The purchase price
is $2.4 million, required modifications to the equipment will cost
$100,000. The company would depreciate the equipment over 4 years,
using straight-line depreciation. A 4-year lease calls for a
payment of $750,000 at the beginning of each year. If
the equipment is purchased, the company will borrow from its bank
at an interest rate of 10 percent.
a. Calculate the cost...
Thomas Corporation is evaluating whether to lease or purchase equipment. Its tax rate is 21% ....
Thomas Corporation is evaluating whether to lease or purchase
equipment. Its tax rate is 21% . The company expects to use the
equipment for 4 years, with no expected salvage value. The purchase
price is $2 million and MACRS depreciation, 3-year class, will
apply. If the company enters into a 4-year lease, the lease payment
is $460,000 per year, payable at the beginning of each year. If the
company purchases the equipment it will borrow from its bank at an...
Lease versus purchase JLB Corporation is attempting to determine whether to lease or purchase research equipment....
Lease versus purchase JLB Corporation is
attempting to determine whether to lease or purchase research
equipment. The firm is in the 26% tax bracket, and its after-tax
cost of debt is currently
9%. The terms of the lease and of the purchase are as
follows:
Lease Annual end-of-year lease payments of
$30,000 are required over the 3-year life of the lease. All
maintenance costs will be paid by the lessor; insurance and other
costs will be borne by the lessee....
Lease versus purchase: JLB Corporation is attempting to determine whether to lease or purchase research equipment....
Lease versus purchase: JLB Corporation is attempting to
determine whether to lease or purchase research equipment. The firm
is in the 28% tax bracket, and its after-tax cost of debt is
currently 9%. The terms of the lease and of the purchase are as
follows: Lease: Annual end-of-year lease payments of $28,000 are
required over the 3-year life of the lease. All maintenance costs
will be paid by the lessor; insurance and other costs will be
borne by the lessee....
Lease versus purchase JLB Corporation is attempting to determine whether to lease or purchase research equipment....
Lease versus purchase JLB Corporation is attempting
to determine whether to lease or purchase research
equipment.
The firm is in the 21% tax bracket, and its after-tax
cost of debt is currently 8%. The terms of the lease and of the
purchase are as follows:
Lease Annual end-of-year lease payments of $25,200 are
required over the 3-year life of the lease. All maintenance costs
will be paid by the lessor; insurance and other costs will be borne
by the lessee....
Sanders Limited is considering whether to lease its equipment as an alternative to borrowing to purchase...
Sanders Limited is considering whether to lease its equipment as
an alternative to borrowing to purchase it. The equipment will cost
$230,000. This amount can be borrowed from a local bank at 8.5%
interest with annual payments amortized over 6 years. Payments
would be at the end of the year. The CCA rate on this equipment
would be 25%, and the expected salvage at the end of 6 years is
$33,000. Alternatively, lease payments of $47,000 could be made
each...
Emerson Corp. is trying to decide whether to lease or purchase a piece of equipment needed...
Emerson Corp. is trying to decide whether to lease or purchase a
piece of equipment needed for the next five years. The equipment
would cost $505,000 to purchase, and maintenance costs would be
$20,300 per year. After five years, Emerson estimates it could sell
the equipment for $100,500. If Emerson leases the equipment, it
would pay $151,900 each year, which would include all maintenance
costs. Emerson’s hurdle rate is 15%. (Future Value of $1, Present
Value of $1, Future Value...
Emerson Corp. is trying to decide whether to lease or purchase a piece of equipment needed...
Emerson Corp. is trying to decide whether to lease or purchase a
piece of equipment needed for the next five years. The equipment
would cost $502,000 to purchase, and maintenance costs would be
$20,700 per year. After five years, Emerson estimates it could sell
the equipment for $100,800. If Emerson leases the equipment, it
would pay $152,000 each year, which would include all maintenance
costs. Emerson’s hurdle rate is 15%.
a. What is the net present value of the cost...
A company is considering whether to lease or purchase some specialized equipment. The capital budgeting analysis...
A company is considering whether to lease or purchase some
specialized equipment. The capital budgeting analysis indicating
the equipment should be secured already has not been
completed. The equipment has a five-year economic and tax life, and
the company uses a straight-line depreciation method. The equipment
costs $1,000,000 if purchased or it can be leased for five-years at
$280,000 per year. The first lease payment is payable in advance.
The equipment’s salvage value is estimated to be $100,000. Revenue
is...
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