not use ai please Buildtrock Builders need a crane costing Rs.10 lakhssubject to depreciation on straight line method andhas a life of 5 years. The lease rent is Rs.2.2 lakhs perannum to be paid in advance each year for 5 years.If the company can raise debt at 14% per annumpayable at the beginning of the year should thecompany buy or lease the crane.

To determine whether Buildtrock Builders should buy or lease the crane, we need to compare the…

Answered: Buildtrock Builders need a crane…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 9P

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XYZ Builders Ltd. need to acquire the use of a crane for their construction business and are considering buying or leasing a crane. The crane costs Rs.1000 subject to SLM depreciation with salvage value 0 at the end of 5 years. In contrast, the lease rent is Rs.3000 p.a. to be paid in advance each year for 5 years.XYZ Builders ltd can raise debt at 20% payable in equal annual instalments, each instalment due at the beginning of the year. Tax applicable in 35%. Should it lease or buy the asset?
Triple Passion Group (TPG) plans to install a new dryer worth RM1.5 million at their snack processing plant. The acquisition of the asset can be done through a full bank loan with an interest rate of 5 percent per annum, and paid in annual installments for 5 years. Another alternative available at this time is for TPG to lease the machine from the leasing company Local Machinary Leasing (LML) Sdn Bhd. Based on the terms of the lease offered by LML, the financial manager of TPG found that there was some important information related to the machine lease that needed to be examined as follows; i. The dryer will be depreciated according to the straight line method for 5 years. ii. The maintenance cost of the machine is estimated at RM75,000 per year. iii. The current corporate tax rate is 28%. iv. The annual lease fee charged by LML Sdn Bhd is RM400,000 per annum for 5 years. v. During the lease period, the lessee is responsible for paying an insurance charge of RM30,000 annually. vi. If…
A company will borrow a loan to finance a 10-year project that will require an initial installation cost of ₱2,500,000. After 2 years another P500,000 and a regular annual upkeep cost of ₱75,000 paid every end of the year. If the interest rate of the loan is 2% per annum, what amount should beloaned?
Company C is considering a leasing arrangement for an asset that has no value after its use for 3 years. It can borrow the value of the asset, at a 3-year simple interest loan of 10% with payments at the end of the year and buy the asset, or the company can make 3 equal end-of-year lease payments of $2,100,000 each and lease them. Annual maintenance costs associated with ownership are estimated at $240,000, but this cost would be borne by the lessor if it leases. What is the net advantage to leasing (NAL), if the firm's tax rate is 25%? (round to the nearest integer)(The Depreciation rate is 33.33% for Year 1, 33.33% for Year 2, and 33.33% for Year 3. The value of the asset $4,800,000)
You are assessing the minimum amount of investment that you will be willing to invest today for a billboard construction project. The useful life of the steel structure is 10 years. Monthly advertising space rental costs P120,000. Advertising contracts requires prepayment of the lease before commencing the rental. Rental revenue will be deposited in a deposit account with 2.5% interest rate, compounded quarterly. What is the minimum amount of investment for the billboard steel foundation today?
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A bulldozer can be purchased for $380,000 and used for 6 years, when its salvage value is 15% of the first cost. Alternatively, it can be leased for $60,000 a year. (Remember that lease payments occur at the start of the year.) The firm’s interest rate is 12%. (a) What is the interest rate for buying versus leasing? Which is the better choice? (b) If the firm will receive $65,000 more each year than it spends on operating and maintenance costs, should the firm obtain the bulldozer? What is the rate of return for the bulldozer using the best financing plan?
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Brambles Inc is looking to acquire a new equipment for its project that will last for eight years. The after-tax required rate of return of the project is 16% per annum. Brambles can borrow at a before-tax interest rate of 8.5% per annum and buy the equipment outright or lease the equipment from ABC's Leasing. Brambles has evaluated the lease and decided to buy the equipment by borrowing since the NPV of lease is calculated to be -$12,000. However, the purchase cost of the equipment was under- estimated by $24,000, also the salvage value of the equipment at the end of the lease term was under- estimated by $8,000. The applicable corporate tax rate is 30% and the equipment is going to be fully depreciated over the eight years using a straight-line method. Will Brambles' decision be affected by adjusting the purchasing cost and salvage value? O It is now indifferent between lease and borrow-to-buy. The equipment should still be purchased by borrowing. None of the other answers is…
An investor is considering buying a property for shillings 500,000. The cost of land is 20% of the purchase price. The building will however be depreciated over 40 years on a straight-line basis. The investor will take a loan of 50% of the purchase price at 10% per annum payable monthly for 20 years . The net operating income for the next 2 years is sh 40000 and sh 50000 . The property can be sold for 600,000 at the end of year 2. The tax on current income is 30% of the capital gain tax is 15% of price appreciation and 30% on price depreciation recapture.Required:Calculate the after tax equity IRR. IS THE PROJECT VIABLE ASSUMING THE INVESTOR HAS A REQUIRED RATE OF RETURN OF 15%.

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