teven's Auto Detailers is trying to decide whether to lease or buy some new equipment for polishing vehicles. The equipment costs $22,000, has a 3-year life, and will be worthless after the 3 years. The aftertax discount rate is 6.2 percent. The annual depreciation tax shield is $1,760 and the aftertax annual lease payment is $6,800. What is the net advantage to leasing
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Steven's Auto Detailers is trying to decide whether to lease or buy some new equipment for polishing vehicles. The equipment costs $22,000, has a 3-year life, and will be worthless after the 3 years. The aftertax discount rate is 6.2 percent. The annual
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- Some equipment is needed for a construction project. It can be leased for $150,000 annually, or it can be purchased for $900,000 at the beginning and sold for $225,000 at the end of 3 years. What is the rate of return for owning the equipment rather than leasing it?You work for a nuclear research laboratory that is contemplating leasing a diagnostic scanner (leasing is a common practice with expensive, high-tech equipment). The scanner costs $5,400,000 and would be depreciated straight-line to zero over four years. Because of radiation contamination, it will actually be completely valueless in four years. Assume that the tax rate is 25 percent. You can borrow at 6 percent before taxes. What would the lease payment have to be for both the lessor and the lessee to be indifferent about the lease? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)You work for a nuclear research laboratory that is contemplating leasing a diagnostic scanner (leasing is a common practice with expensive, high-tech equipment). The scanner costs $4,900,000 and would be depreciated straight-line to zero over three years. Because of radiation contamination, it will actually be completely valueless in three years. Assume that the tax rate is 25 percent. You can borrow at 7 percent before taxes. What would the lease payment have to be for both the lessor and the lessee to be indifferent about the lease?
- Ben Halls is trying to decide whether to lease or purchase a new car costing $18,000. If he leases, he’ll have to pay a $600 security deposit and monthly payments of $450 over the 36-month term of the closed-end lease. Ben could earn 1% on the amount of any down payment or security deposit. On the other hand, if he buys the car then he’ll have to make a $2,400 down payment and will finance the balance with a 36-month loan with a 4% interest rate; he’ll also have to pay a 6 percent sales tax ($1,080) on the purchase price, and he expects the car to have a residual value of $6,500 at the end of 3 years. Ben can earn 4 percent interest on his savingsYou work for a nuclear research laboratory that is contemplating leasing a diagnostic scanner. The scanner costs $4,000,000 and it would be depreciated straight-line to zero over 4 years.Because of radiation contamination, it will actually be completely valueless in 4 years.You can lease it for $1,000,000 per year for 4 years. Assume the tax rate is 30 percent.You can borrow at 9 percent before taxes. What is the net advantage to leasing (NAL) from your company's standpoint? Please choose the correct option: A. $760,280.12B. $558,565.94C.$ 586,494.24D. $ 530,637.64E. $-558,565.94A diesel generator for electrical power can be purchased by a remote community for $350,000 and used for 10 years, when its salvage value is $50,000. Alternatively, it can be leased for $42,500 a year. (Remember that lease payments occur at the start of the year.) The community’s interest rate is 7%. (a) What is the interest rate for buying versus leasing? Which is the better choice? (b) The community will spend $80,000 less each year for fuel and maintenance, than it currently spends on buying power. Should it obtain the generator? What is the rate of return for the generator using the best financing plan?
- Your company decided to offer product delivery service and would need a truck for the delivery. You are evaluating the following two options. Option 1: Your company can lease a truck at a pretax cost of $27,000 per year. Option 2: Your company can buy a truck at a cost of $84,000, with annual pretax maintenance expenses of $14,000. The truck will depreciate to zero on a straight-line basis. The truck has a 4 years life and will have a salvage value of $18,000 at the end of its life. If the tax rate is 35% and the discount rate is 10%, which option would you prefer? (Hint: compute the equivalent annual cost (EAC).)Your rental company wants to purchase a new car for its car rental business. The car costs $20,000. It will be obsolete in three years. Your options are to borrow the money at 10% or lease the car. If you lease it, the payments will be $7,500 per year, payable at the beginning of each year. If you buy the car, you can apply a CCA rate of 30% per year. The tax rate is 35%. Assume that the car has a projected salvage value of $700 and the asset pool is closed, what would be NAL. Should you buy or lease? Why?You work for a nuclear research laboratory that is contemplating leasing a diagnostic scanner (leasing is a common practice with expensive, high-tech equipment). The scanner costs $5, 100, 000 and would be depreciated straight - line to zero over four years. Because of radiation contamination, it will actually be completely valueless in four years. Assume that the tax rate is 22 percent. You can borrow at 6 percent before taxes. What would the lease payment have to be for both the lessor and the lessee to be indifferent about the lease? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
- You work for a nuclear research laboratory that is contemplating leasing a diagnostic scanner (leasing is a common practice with expensive, high-tech equipment). The scanner costs $5,600,000 and would be depreciated straight-line to zero over five years. Because of radiation contamination, it will actually be completely valueless in five years. Assume that the tax rate is 22 percent. You can borrow at 8 percent before taxes. What would the lease payment have to be for both the lessor and the lessee to be indifferent about the lease? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Break-even lease paymentYou work for a nuclear research laboratory that is contemplating leasing a diagnostic scanner (leasing is a common practice with expensive, high-tech equipment). The scanner costs $4.3 million and would be depreciated straight-line to zero over four years. Because of radiation contamination, it will actually be completely valueless in four years. Assume that the tax rate is 21 percent. You can borrow at 8 percent before taxes. What would the lease payment have to be for both the lessor and the lessee to be indifferent about the lease? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89.) Break-even lease paymentYour company is currently replacing some of its aging stamping machines. Equipment can be purchased for $300,000; it has a useful life of 10 years and will be depreciated straight-line to zero. After 10 years it can be sold for $25,000. Another option for your company is to lease this Equipment at $36,000 per year. Your company can deduct lease payments as an operating expense when they are paid as this will be an operational lease. Your company borrowing rate is 8% and your tax rate is 25%. Should you lease or purchase equipment? Why?