A manufacturer can lease a machine for 7 years at $3,000 per quarter, payableat the beginning of each quarter.Alternatively, they can purchase the machine for $78,000 and sell it for $8,700in 7 years.The cost of capital is 6.2% compounded annually.a. What is the present value of the cost:(enter a positive value accurate to the nearest dollar)i) of the lease option? $ii) of the purchase option? $b. Should the manufacturer purchase or lease?O Purchase since Purchase PV is higher than Lease PVO Lease since Lease PV is higher than Purchase PVO Lease since Purchase PV is lower than Lease PVO Purchase since Lease PV is lower than Purchase PVLease since Lease PV is lower than Purchase PVPurchase since Lease PV is higher than Purchase PVSubmit Question

A lease is a contract in which one party (the proprietor of an asset) agrees to give the other party…

Answered: A manufacturer can lease a machine for…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 1P

See similar textbooks

Similar questions

Assume you can lease an item you need for a project for GH¢950/day. To purchase the item, thecost is GH¢13,000 plus a daily operational cost of GH¢ 300/day.a. How long will it take for the purchase cost to be the same as the lease cost? Critically discuss the appropriate make or buy decisions to be made in case the item will beused for; i. ii. iii. At most 15 daysMore 15 days but not exceeding 20 daysAt least 20 days
A builder is offering $137,381 loans for his properties at 9 percent for 25 years. Monthly payments are based on current market rates of 9.5 percent and are to be fully amortized over 25 years. The property would normally sell for $150,000 without any special financing. Required: a. At what price should the builder sell the properties to earn, in effect, the market rate of interest on the loan? Assume that the buyer would have the loan for the entire term of 25 years. Do not round intermediate calculations. Round your final answer to the nearest whole dollar amount.) b. At what price should the builder sell the properties to earn, in effect, the market rate of interest on the loan if the property is resold after 10 years and the loan repaid? Do not round intermediate calculations. Round your final answer to the nearest whole dollar amount.)
A manufacturer can lease a machine for 6 years at $3,680 per quarter, payable at the beginning of each quarter. Alternatively, they can purchase the machine for $76,000 and sell it for $8,700 in 6 years. The cost of capital is 9.1% compounded annually. a. What is the present value of the cost: (enter a positive value accurate to the nearest dollar) i) of the lease option? ii) of the purchase option? GA
Antique Accents projects that demand for its services will rise for a period of four years before subsiding. It can lease additional communication equipment for $1,300 at the beginning of every quarter year for four years. Alternatively, it can purchase the equipment for $22,500 at 3.50% compounded quarterly. The salvage value of the equipment after four years is expected to be $3,900. a) Which option would you recommend? O Purchase the equipment. O Lease the equipment. b) In current dollars, how much better is that option? For full marks your answer(s) should be rounded to the nearest cent. Current dollars saved = $ 0.00
A builder is offering $107, 960 loans for his properties at 9 percent for 25 years. Monthly payments are based on current market rates of 9.5 percent and are to be fully amortized over 25 years. The property would normally sell for $120,000 without any special financing. Required: a. At what price should the builder sell the properties to earn, in effect, the market rate of interest on the loan? Assume that the buyer would have the loan for the entire term of 25 years. b. At what price should the builder sell the properties to earn, in effect, the market rate of interest on the loan if the property is resold after 10 years and the loan repaid?
Your property has net operating income of 4,500,000. Assuming you value the property with a cap rate of 6.5%, what is the DSC ratio if the lender will lend up to 75% of value and the rate is 4.5% based on a monthly pay, 30 years, fully amortizing loan? Group of answer choices 1.43 1.35 1.51 1.27
A builder is offering $117,767 loans for his properties at 9 percent for 25 years. Monthly payments are based on current market rates of 9.5 percent and are to be fully amortized over 25 years. The property would normally sell for $130,000 without any special financing. Required: a. At what price should the builder sell the properties to earn, in effect, the market rate of interest on the loan? Assume that the buyer would have the loan for the entire term of 25 years. Complete this question by entering your answers in the tabs below. Required A At what price should the builder sell the properties to earn, in effect, the market rate of interest on the loan? Assume that the buyer would have the loan for the entire term of 25 years. (Do not round intermediate calculations. Round your final answer to the nearest whole dollar amount.) Sale value $ 116,134
Wildhorse Inc. is considering leasing a car from Jackie Inc. for a period of four years. The fair value of the car today is $39,500. The current market interest rate for financing such a vehicle is 4% compounded semi-annually. Below is a time diagram of this situation. Present Value PV-OA $39,500 Pmt=? ? Interest Rate ✓= 2% ? 3 5 Number of Periods n=8 Semi-annual lease payment 7 8 Calculate the semi-annual lease payment assuming that the payment is made at the end of the period. (Round answer to 2 decimal places, e.g. 5,275.25.)
A borrower is purchasing a property for $180,000 and can choose between two possible loan alternatives. The first is a 90% loan for 25 years at 9% interest and the second is a 95% loan for 25 years at 9.25% interest. Assuming the loan will be held to maturity, what is the incremental cost of borrowing the extra money? 18.75% OO 14.34% 13.50% 12.01%
The Company owns a machine with a value of $50,000 and a 5-year useful life. The estimated salvage value in five years is $10,000. The number of payments will be five (5) and the first payment is due immediately. The remaining payments are due at the end of each of the next four years. Assume your client desires a 10% rate of return. What amount of payment should be specified in the lease contract? Consider the salvage value. When you consider the salvage value, in Excel, the future value is a negative number, and the present value is positive. State your answer without commas or dollar signs, and no decimals.
You want to build a property at a cost of $650,000 on a vacant lot. The property will have annual NOI of $80,000. The recapture rate over 50 years of the building to be two percent per year. The cap rates for the land is 6%. Assuming the mortgage rate is 5.5%, what is the value of the vacant lot? O $520,833 O $555,622 O $518,687 O None of the given answers O $523,159
An industrial engineering consulting firm signed a lease agreement for simulation software. Calculate the present worth in year 0 if the lease requires a payment of $30,000 now and amounts increasing by 5% per year through year 7. Use an interest rate of 10% per year.

SEE MORE QUESTIONS

Recommended textbooks for you

EBK CONTEMPORARY FINANCIAL MANAGEMENT

Finance

ISBN:

9781337514835

Author:

MOYER

Publisher:

CENGAGE LEARNING - CONSIGNMENT

Managerial Accounting

Accounting

ISBN:

9781337912020

Author:

Carl Warren, Ph.d. Cma William B. Tayler

Publisher:

South-Western College Pub

EBK CONTEMPORARY FINANCIAL MANAGEMENT

Finance

ISBN:

9781337514835

Author:

MOYER

Publisher:

CENGAGE LEARNING - CONSIGNMENT

Managerial Accounting

Accounting

ISBN:

9781337912020

Author:

Carl Warren, Ph.d. Cma William B. Tayler

Publisher:

South-Western College Pub

SEE MORE TEXTBOOKS