Finance5-7 Please use the following information to answer the next THREE questions.Kaplan Brewery is considering either purchasing or leasing a $1.000.000 piece of specialized equipment,which would generate $224,000 of incremental sales for Kaplan for each year of the project. The equipmenthas a life of 6 years, belongs in a 25% CCA class, and has an estimated salvage value of $240,000 in 5years. The before-tax cost of debt is 8% for this purchase. A lease on the equipment for 6 years is priced a$172,000 per year, and lease payments are due at the beginning of the year Assume the tax deductibilitybenefit of the lease payments occurs at the time each fease payment is made. Kaplan's corporate tax rate is34%PV5. What is the present value of the after-tax lease payments?A) $591,043(B) $601,221C) $613,838PV Lease PMTS = $172,000 (1-0.34)PVIFAYD) $622,914E) $641,145 <3 (1-1+ 5,28)= 6) 4.28 =5.28-r-discontrole 8% (1-0.34) =5.28%6. Pretend that your answer to the previous question was exactly $600,000. Should Kaplan borrow moneyand buy the equipment or lease it? Why?A) Kaplan should buy the asset because the NPV of leasing versus buying would be -$450.buying?A) $113,204B) Kaplan should buy the asset because the NPV of leasing versus buying would be $1,246.C) Kaplan should lease the asset because the NPV of leasing versus buying would be $450.D) Kaplan should lease the asset, because the NPV of leasing versus buying would be $1,246.E) Kaplan would be indifferent between buying the asset and leasing the asset.NAL to leasing =-450.55.It cost of Purchesung = Purchase price - PVCCATS > Imil - 224,147.87P775, 802.33terschimVot selvese volve = 240000 x PVIFE 5.28%, 6 years b= 4762.52.88PV of Lease PMTS = 600,0007. What would the before-tax lease payment have to be to make Kaplan indifferent between leasing andB) $171,522C) $119,182D) $180,578E) $155,2218. Which of the following is a valid argument for leasing?A) Avoiding capital expenditure controlsB) Increased resale costsC) Transferring riskcheet financing(1

After tax salvage value is calculated as shown below. After tax salvage value=Market value-Tax…

Please use the following information to answer the next THREE questions. Kaplan Brewery is considering either purchasing or leasing a $1.000.000 piece of specialized equipment, which would generate $224,000 of incremental sales for Kaplan for each year of the project. The equipme has a life of 6 years, belongs in a 25% CCA class, and has an estimated salvage value of $240,000 in 5 years. The before-tax cost of debt is 8% for this purchase. A lease on the equipment for 6 years is priced $172,000 per year, and lease payments are due at the beginning of the year Assume the tax deductibility benefit of the lease payments occurs at the time each fease payment is made. Kaplan's corporate tax rate is PV 34%

Please use the following information to answer the next THREE questions. Kaplan Brewery is considering either purchasing or leasing a $1.000.000 piece of specialized equipment, which would generate $224,000 of incremental sales for Kaplan for each year of the project. The equipme has a life of 6 years, belongs in a 25% CCA class, and has an estimated salvage value of $240,000 in 5 years. The before-tax cost of debt is 8% for this purchase. A lease on the equipment for 6 years is priced $172,000 per year, and lease payments are due at the beginning of the year Assume the tax deductibility benefit of the lease payments occurs at the time each fease payment is made. Kaplan's corporate tax rate is PV 34%

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 8P

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