Assume you can lease an item you need for a project for GH¢950/day. To purchase the item, the cost 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 be used for; i. ii. iii. At most 15 days More 15 days but not exceeding 20 days At least 20 days

Assume you can lease an item you need for a project for GH¢950/day. To purchase the item, the cost 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 be used for; i. ii. iii. At most 15 days More 15 days but not exceeding 20 days At least 20 days

Managerial Accounting

15th Edition

ISBN:9781337912020

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

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

Chapter11: Differential Analysis And Product Pricing

Section: Chapter Questions

Problem 2DQ: A company could sell a building for 250,000 or lease it for 2,500 per month. What would need to be...

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A company could sell a building for 250,000 or lease it for 2,500 per month. What would need to be considered in determining if the lease option would be preferred?
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
A manufacturer can lease a machine for 7 years at $3,000 per quarter, payable at the beginning of each quarter. Alternatively, they can purchase the machine for $78,000 and sell it for $8,700 in 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 PV O Lease since Lease PV is higher than Purchase PV O Lease since Purchase PV is lower than Lease PV O Purchase since Lease PV is lower than Purchase PV Lease since Lease PV is lower than Purchase PV Purchase since Lease PV is higher than Purchase PV Submit Question
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.
Assume that a company is choosing between two alternatives-lease a piece of equipment for five years or buy a piece of equipment and sell it in five years. The costs associated with the two alternatives are summarized as follows: Lease Buy $ 60,000 $ 6,000 Purchase cost of equipment Annual operating costs Immediate deposit Annual lease payments Salvage value (5 years from now) $ 8,000 Click here to view Exhibit 7B-1 and Exhibit 7B-2, to determine the appropriate discount factor(s) using the tables provided. If the company chooses the lease option, it will have to pay an immediate deposit of $25,000 to cover any future damages to the equipment. The deposit is refundable at the end of the lease term. The annual lease payments are made at the end of each year. Based on a net present value analysis with a discount rate of 12%, what is the financial advantage (disadvantage) of buying the equipment rather than leasing it? $ 25,000 $ 18,000
A// A civil engineer wants to invest $ 72000 in a new loader, if the income from temporary leasing of loader in expected to be 14000$ per year. The length of time required to recover the investment at an interest rate 14% per year in closet to?
You are given the task to evaluate the value of a rental property. You identified similar properties and calculated average cap rate is 15%. You estimated the property's Net operating Income to be $570,000. What is the maximum price you would pay for the property? Group of answer choices $3.5 million $655,000 $3.8 million $5.7 million
You are given opportunity to purchase product for $42, 000. The product will have annual operating expenses of $4,000, and a salvage value of $20,000 at the end of its useful life of 6 years. Assuming a discount rate of 9.0%, what is the minimum acceptable revenue to justify taking this project? A 1.01% B $333 C $2704 D $767 E $10704
Liverpool Limited urgently needs to upgrade its utility capacity. They require a new generator costing R1 200 000. Thegenerator can be leased or owned and the terms are as follows:Cost of leasing:The lease would require annual end-of-year payments of R320 200 over the four years.Service and insurance costs of R78 500 per annum will be borne by the lessor.The lessee will exercise its option to purchase the asset for R80 000 at the termination of the lease in four years.Cost of owning:The cost could will be settled in cash due to the companies excess cashflows after winning the Premier league in 2023.Liverpool Limited will pay maintenance cost of R6 000 per month. Depreciation charges are based on the straight-linemethod. At the end of the period the generator will be sold at its residual value ofR75 000.Additional Information:· the company is in the 28% tax bracket· the after-tax cost of the debt is 13% Calculate the after-tax cash outflows and the net present value of the cash outflows…
An equipment that currently costs $750,000 is needed for construction at the project site for 5 years.The Project Company have been presented with the alternative of leasing the equipment for an annual rental payment of$210,000.Should the project company lease or buy the equipment,if,i. Rental payments are made at the end of the year? ii.Rental payments are made at the beginning of the year?
consider $175,000 as lease payment
Alternative Calculation of Monthly Lease Payment: FV PV (1+ i)N 1 LP = 1 (1+i)N-A i + A where LP – monthly lease payment; PV – the present value of the future payments on the lease, including the residual value, i.e. it is a lease amount; FV – the future value of leased asset or its residual value; N- the lease term (number of months); A - the number of payments to be paid in advance (0,1,2,...); i- monthly interest rate (i = APR÷12). The formula presented above can be used for any payment frequency. Just be sure that N is the number of periods and į is the interest rate per period.