EXERCISE 2: LEASING VERSUS BUYINGYou have two options: to buy or to lease a video store.Option 1: PurchaseYear$300,00080,000CostAdditional costCash flow from operationsCash flow from operationsCash flow from operationsCash flow from operationsCash flow from operationsCash flow from operationsCash flow from operationsCash flow from operationsCash flow from operationsCash flow from operations145,00070,000190,000105,000140,00034.6.160,000165,000170,000175,000180,0001011Cash flow from sale of business400,000If you want to make 25% on your money, should you buy the video store? To answerthis question, calculate the following:1. Net present value2. Internal rate of returnOption 2: LeasingActivateGo to Settin You can lease a video store in another town. The net yearly cash flow from operationsafter deducting lease payments is estimated at $45,000 (net) from year 1 to year 10.1. If you want to make 25% on your investment, should you lease the video store?2. Which of the two options would you choose?

Given information: There are two options given for operating a video store. The first is to buy and…

EXERCISE 2: LEASING VERSUS You have two options: to buy or to lease a video store. Option 1: Purchase Year $300,000 80,000 45,000 70,000 90,000 105,000 140,000 160,000 Cost Additional cost Cash flow from operations Cash flow from operations Cash flow from operations Cash flow from operations Cash flow from operations Cash flow from operations Cash flow from operations Cash flow from operations Cash flow from operations Cash flow from operations Cash flow from sale of business 1 1 3 4. 5 165,000 170,000 175,000 9. 180,000 10 400,000 11

EXERCISE 2: LEASING VERSUS You have two options: to buy or to lease a video store. Option 1: Purchase Year $300,000 80,000 45,000 70,000 90,000 105,000 140,000 160,000 Cost Additional cost Cash flow from operations Cash flow from operations Cash flow from operations Cash flow from operations Cash flow from operations Cash flow from operations Cash flow from operations Cash flow from operations Cash flow from operations Cash flow from operations Cash flow from sale of business 1 1 3 4. 5 165,000 170,000 175,000 9. 180,000 10 400,000 11

Quickbooks Online Accounting

3rd Edition

ISBN:9780357391693

Author:Owen

Publisher:Owen

Chapter3: Setting Up A New Company

Section: Chapter Questions

Problem 2.3C

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Unauthorized My Home CengageNOWv2| Online teachin x + -> https://v2.cengagenow.com/ilrn/takeAssignment/takeAssignmentMain.do?invoker=&takeAssignmentSessionLocator=&inprogres. Chapter 20 еВook Operating Leverage Beck Inc. and Bryant Inc. have the following operating data: Beck Inc. Bryant Inc. Sales $1,250,000 $2,000,000 Variable costs (750,000) (1,250,000) Contribution margin $500,000 $750,000 Fixed costs (400,000) (450,000) Operating income $100,000 $300,000 a. Compute the operating leverage for Beck Inc. and Bryant Inc. If required, round to one decimal place. Beck Inc. Bryant Inc. b. How much would operating income increase for each company if the sales of each increased by 20%? Dollars Percentage Beck Inc. % Bryant Inc. % c. The difference in the increases of operating income is due to the difference in the operating leverages. Beck Inc.'s higher operating leverage means that its fixed costs are a larger percentage of contribution margin than are Bryant Inc.'s. Feedback 6:43 PM…
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