Keating Co. is considering disposing of equipment with a c through a broker for $33,000, less a 7% broker commissi $49,000. Keating will incur repair, insurance, and property expected to have no residual value. The net differential in Oa. $4,417 Ob. $7,572 Oc. $9,465 Od. $6,310
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Cash from selling =33000
Broker commission =7%
Net proceeds from selling =30690
Proceedings from lease =49000
Expenses =12000
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- Keating Co. is considering disposing of equipment with a cost of $66,000 and accumulated depreciation of $46,200. Keating Co. can sell the equipment through a broker for $32,000, less a 5% broker commission. Alternatively, Gunner Co. has offered to lease the equipment for five years for a total of $45,000. Keating will incur repair, insurance, and property tax expenses estimated at $9,000 over the five-year period. At lease-end, the equipment is expected to have no residual value. The net differential income from the lease alternative isKeating Co. is considering disposing of equipment with a cost of $62,000 and accumulated depreciation of $43,400. Keating Co. can sell the equipment through a broker for $28,000, less a 9% broker commission. Alternatively, Gunner Co. has offered to lease the equipment for five years for a total of $47,000. Keating will incur repair, insurance, and property tax expenses estimated at $12,000 over the five-year period. At lease-end, the equipment is expected to have no residual value. The net differential income from the lease alternative is Oa. $6,664 Ob. $11,424 Oc. $14,280 Ⓒd. $9,520Hull Manufacturing Co. must decide whether to purchase or lease a new piece of equipment. The equipment can be leased for $4,000 a year or purchased for $15,000. The lease includes maintenance and service. The salvage value of the equipment at the end of five years is $5,000. If the equipment is owned, service and maintenance charges (a tax-deductible cost) would be $900 a year. The firm can borrow the entire amount at a rate of 15% if they buy. The tax rate is 50%. Which method of financing would you choose? Use the following capital cost allowance amounts. Year Amount $4,500 3,150 2,205 1,543 1,081 2 3 4
- Robert Cooper is considering purchasing apiece of business rental property containing storesand offices at a cost of $250,000. Cooper estimatesthat annual disbursements (other than income taxes)will be about $12,000. The property is expected toappreciate at the annual rate of 5%. Cooper expectsto retain the property for 20 years once it is acquired.Then it will be depreciated as a 39-year real-propertyclass (MACRS), assuming that the property will beplaced in service on January 1st. Cooper’s marginaltax rate is 30% and his MARR is 15%. What wouldbe the minimum annual total of rental receipts thatwould make the investment break even?Pike Industries is considering selling excess machinery with a book value of $150,000 (original cost of $475,000 less accumulated depreciation of $325,000) for $72,500 less a 5% brokerage commission. Alternatively, the machinery can be leased out for a total of $107,500 for five years, after which it is expected to have no residual value. During the period of the lease, Pike Industries' costs of repairs, insurance, and property tax expenses are expected to be $40,000. a. Prepare a differential analysis report for the lease or sell decision. PIKE INDUSTRIES Proposal to Lease or Sell Machinery Differential Analysis Report Differenti revenue from alternatives: Differential cost of alternatives: b. Based on the data presented, which is the most appropriate plan of action?Moore & Moore (MM) is considering the purchase of a new machine for $50,000, installed. MM will use the MACRS accelerated method to depreciate the machine, which is classified as 5-year property (see the following MACRS table for depreciation rates). MM expects to sell the machine at the end of its 4-year operating life for $10,000. If MM's marginal tax rate is 40%, what will the after-tax cash flow be when it disposes of the machine at the end of Year 4? Annual depreciation rates for years 1 through 6 are respectively as follows: 20%, 32%, 19%, 12%, 11%, 6%. A. $7,656 B. $8,059 C. $8,484 D. $8,930 E. $9,400
- Comey Products has decided to acquire some new equipment having a $220,000 purchase price. The equipment will last four years and is in the MACRS 3-year class. (The depreciation rates for Year 1 through Year 4 are 0.3333, 0.4445, 0.1481, and 0.0741.) The firm can borrow at a 7% rate and pays a 25% federal-plus-state tax rate. Comey is considering leasing the property but wishes to know the cost of borrowing that it should use when comparing purchasing to leasing and has hired you to answer this question. What is the correct answer to Comey's question? Do not round intermediate calculations. Round your answer to the nearest dollar.A local delivery company has purchased a delivery truck for $15,000. The truck will be depreciated under MACRS as a five-year property. The truck's market value (or selling price) is expected to be $2,500 less each year. The O&M costs are expected to be $3.000 per year. The firm is in a 40% tax bracket, and its MARR is 15%. Compute the annual-equivalent cost for retaining the truck for a two-year period, which will be(a) $5,527 (b) $5.J75 (c) $5,362 (d) $5,014A local delivery company has purchased a delivery truck for $15,000. The truck will be depreciated under MACRS is five-year property. The truck's market va lue (or selling price) is expected to be $2,500 less each year. The O&M costs are expected to be $3.000 per year. The firm is in a 40% tax bracket. and its MARR is 15%. Compute the annual-equivalent cost for retaining the truck for a two-year period, which will be(a) $5,527 (b) $5.J75 (c) $5,362 (cl) $5,014
- Dave's Demolitions Inc. is considering purchasing $697,400 of equipment for a four- year project. The equipment falls in the five-year MACRS class. At the end of the project the equipment can be sold for an estimated $135,000. If the tax rate is 23 percent, what is the amount of the after-tax salvage value of the equipment?Ajman LLC is planning to purchase a machinery for OR.85,000. The useful life of the machinery is 6 years. The machinery will be sold after 5 years for OR.15,000. The annual cost of maintenance and repairs is expected to be OR.8,000. The company wants to insure the machinery with an annual premium of OR. 3,000. The cost of capital for the company is 12%. Alternatively, company has an option to lease the same machinery with a lease rental of OR.25,000 per year. If company acquires the machinery on lease, the maintenance cost should be incurred by the company and insurance will be borne by the lessor.You are required to calculate the total annual cost, if Ajman LLC company lease the asset. a. RO.23,000 b. RO.43,000 c. None of the options d. RO.33,000Big Sky Mining Company must install $1.5 million of new machinery in its Nevadamine. It can obtain a bank loan for 100% of the purchase price, or it can lease themachinery. 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, propertytaxes, and maintenance.(3) The firm’s tax rate is 25%.(4) The loan would have an interest rate of 15%. It would be nonamortizing, with onlyinterest paid at the end of each year for four years and the principal repaid at Year 4.(5) The lease terms call for $400,000 payments at the end of each of the next 4 years.(6) Big Sky Mining has no use for the machine beyond the expiration of the lease, andthe machine has an estimated residual value of $250,000 at the end of the 4th year.a. What is the cost of owning?b. What is the cost of leasing?c. What is the NAL of the lease?